The Financial Conduct Authority (FCA) will be examining compensation limits and funding class thresholds as part of the next phase of its review of the Financial Services Compensation Scheme (FSCS). The next steps were outlined when the FCA informed the industry of the feedback it received in relation to the ongoing scrutiny of the framework governing the scheme.
“The review aims to make sure the compensation framework continues to provide an appropriate level of consumer protection, with costs to industry distributed in a fair and sustainable way supporting innovation and growth,” declared the regulator.
“The main theme from the feedback was the importance of firms improving their conduct so there were fewer calls on the FSCS from mis-sold products by failed firms. Feedback also focussed on the need for firms to be more financially resilient to address the underlying causes of high redress liabilities.”
Aside from reviewing compensation limits and funding class thresholds to consider whether they remain appropriate, the FCA will also be carrying out consumer and firm research to improve its understanding of the impact of FSCS protection on areas including company behaviour and incentives.
“We welcome the constructive engagement and feedback, which will inform the next phase of this work,” said FCA consumers and competition executive director Sheldon Mills.
“We want to make sure the cost to industry for providing vital protection to consumers through the FSCS is distributed in a fair and sustainable way – that the polluter pays. We’re continuing our assertive action to prevent harm from happening in the first place, which should help reduce the levy over time.”
Action being taken by the watchdog includes placing twice as many restrictions on firms to prevent them from promoting or selling certain products and services, as well as “being tough at the gateway” to prevent potentially harmful players from entering the market.
