White paper: Call to end FSCS cross-subsidisation

Cross-subsidisation within the Financial Services Compensation Scheme (FSCS) should end, according to some respondents to the Treasury’s consultation on the future of financial regulation.

In its February paper, the Treasury proposed maintaining the FSCS as a single organisation, although the Prudential Regulatory Authority and Financial Conduct Authority would be responsible for making compensation and taking fees in their respective areas.

Summarising responses, the Treasury said: "A number of respondents wanted to see an end to cross-subsidy in the FSCS funding and sought clarification on whether the proposed approach to split rule-making between the two regulators implied an end to cross-subsidy between classes."

Respondents also pointed out ongoing discussions in Europe on compensation schemes made it difficult to determine the future of the FSCS, while the fallout from the Keydata collapse also affected responses.

It continued: "There were a number of criticisms of the FSCS funding model from investment firms, IFAs/brokers and small firms in general, in view of the recent interim levy related to Keydata."

In its draft bill for the new regulatory regime, the Treasury also confirmed the FSCS' accounts will be audited by the National Audit Office.