Published on 31 March 2017
Financial Services Compensation Scheme – Management Expenses Levy Limit 2017/18 – PS6/17
This Prudential Regulation Authority (PRA) policy statement (PS) provides feedback to responses to the PRA Consultation Paper 1/17 ’Financial Services Compensation Scheme – Management Expenses Levy Limit 2017/18’ (the CP) and final rules for the Financial Services Compensation Scheme (FSCS) Management Expenses Levy Limit (MELL) for 2017/18. It is relevant to all PRA authorised firms, but contains no material of direct relevance to retail financial services consumers or consumer groups upon which they might need to act.
The Financial Conduct Authority (FCA) board has also published its Handbook Notice, incorporating the 2017/18 MELL rules.
The MELL for 2017/18 will be £74.5 million. This includes:
- FSCS management expenses of £69.2 million to cover the FSCS’s ongoing operating costs including staff, facilities, claims handling, and legal and other professional services; and
- an unlevied contingency reserve of £5.3 million which allows the FSCS to levy additional funds at short notice in the event of a significant unexpected event, without the need for further consultation by the PRA and the FCA.
Feedback on consultation responses
There were four responses to the CP. Some respondents welcomed the reduction in FSCS management expenses, excluding outsourced claims handling costs, and the additional transparency provided in the FSCS’s Plan and Budget. Responses focussed on how the FSCS proposes to reduce claims handling costs, how the FSCS reprioritises spending within financial years, and increasing transparency over the FSCS’s budget and activities.
Appendix
PRA RULEBOOK: NON AUTHORISED PERSONS: FSCS MANAGEMENT EXPENSES LEVY LIMIT AND BASE COSTS INSTRUMENT 2017
Published on 16 January 2017
Financial Services Compensation Scheme – Management Expenses Levy Limit 2017/18 – CP1/17
Background
This Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) consultation paper (CP) sets out the consultation on the management expenses levy limit (MELL) for the Financial Services Compensation Scheme (FSCS) for 2017/18. The MELL being consulted on for 2017/18 is £74.54 million.
The MELL is the maximum amount which the FSCS may levy in a year without further consultation. This covers the projected costs of operating the scheme (£69.24 million), excluding claimants’ compensation costs, and an unlevied contingency reserve (£5.3 million).
The MELL provides the FSCS with adequate resources to process compensation claims resulting from the failure of financial services firms. These functions are conferred on it by Part XV of the Financial Services and Markets Act 2000 (FSMA). The MELL is consulted on annually, jointly by the FCA and the PRA.
The consultation is relevant to all FCA and PRA authorised firms.
Summary of proposals
The proposed MELL for 2017/18 is £74.54 million, consisting of:
- FSCS management expenses of £69.24 million; and
- a contingency reserve of £5.3 million.
The total MELL of £74.54 million is, therefore, the maximum amount that the FSCS may levy in the year without further formal consultation by the FCA and the PRA.
The proposed rules for the FCA and the PRA to set the MELL for 2017/18 are in Appendices 1 and 2 respectively.
Responses
This consultation closed on Monday 13 February 2017.
Please send comments on this CP using the form on the FCA’s website.
The PRA and the FCA will consider the feedback and will finalise and publish rules in a policy statement in March 2017. The finalised rules will take effect on 1 April 2017 and invoices will be sent out from July 2017.
Consultation Paper 1/17