In this Consultation Paper (CP), we – the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA) – set out proposals for the Management Expenses Levy Limit (MELL) for the Financial Services Compensation Scheme (FSCS) for 2021/22. This CP is supported by the FSCS’s proposed Plan and Budget for 2021/22.
The FSCS is a fund of last resort to provide compensation for consumers when financial services firms fail. Its other functions include:
- making recoveries from failed financial institutions
- promoting consumer awareness of FSCS protection and
- verifying account information firms provide to enable faster pay-out to depositors
Under section 223(1) of the Financial Services and Markets Act 2000 (FSMA), the FCA and the PRA must set a limit for the total management expenses that the FSCS can levy on financial services firms. The MELL is the maximum amount that the FSCS may levy in a year for its operating costs without further consultation. Setting the right MELL ensures that the scheme has sufficient funding to exercise the functions conferred on it by Part XV of FSMA and by rules made by the FCA and the PRA.
This CP is relevant to all FCA and PRA authorised firms. It is not of direct relevance to retail financial services consumers or consumer groups, and they do not need to act on it.
Summary of the proposal
The proposed MELL for 2021/2022 is £105.5 million consisting of a FSCS management expenses budget of £90.5 million and an unlevied reserve of £15 million. The proposed MELL would apply from Thursday 1 April 2021, the start of the FSCS’s financial year, to Thursday 31 March 2022.
Responses and next steps
This consultation closes on Friday 19 February 2021. Please send any comments on the proposed MELL using the online response form on the FCA’s website Opens in a new window Opens in a new window Opens in a new window or write to the FCA at the address on page 2.
The FCA is accepting responses on behalf of both the FCA and the PRA, and both authorities will consider the responses.
The FCA will then issue a Handbook Notice and the PRA will issue a policy statement so that final rules can be in place for the start of the FSCS’s financial year on Thursday 1 April 2021.