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UK FCA mulls risk-based levies for Financial Services Compensation Scheme

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UK FCA mulls risk-based levies for Financial Services Compensation Scheme

British firms with a greater risk appetite than their more cautious peers might have to pay higher contributions to the U.K.'s Financial Services Compensation Scheme under new proposals unveiled by the Financial Conduct Authority Dec. 14.

The regulator set out a range of options for changing both how the Financial Services Compensation Scheme is funded and the coverage it gives customers. The proposals include introducing risk-based levies and updating the scheme's compensation limits and activities in light of pension reforms that took effect in the country in April 2015.

The FCA is also consulting on a number of specific proposals to change rules affecting the scope and operation of FSCS funding, including extending the coverage to some aspects of fund management and debt management firms and requiring Lloyd's of London to contribute appropriately to the retail pool.

Additionally, the regulator is seeking to raise the maximum compensation that a client can receive if an investment company fails to as much as £1 million from the current £50,000, in line with the pension lifetime allowance.

A consultation on the proposals runs through March 31, 2017. The FCA looks to implement the changes in the 2018-2019 financial year. Further rule changes on the scheme's funding will be made in the following financial year.

The scheme was last reviewed in March 2013.