FSCS levy to drop 2.5%
The Financial Services Compensation Scheme will have a 2016/17 management expenses levy limit of £72.7 million - a 2.5% annual reduction.
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In a consultation paper, the PRA and FCA agreed a total of £67.4m in FSCS management expenses, with an unchanged contingency reserve of £5.3m.
The levy will cover on-going operating expenses, IT, outsourcing and claims handling, legal or other professional services, and includes provision for the FSCS’s current five-year strategic change programme.
Financing and major recoveries expenses, including the costs of compensation from the major banking failures of 2008/09, are expected to fall by 50%, in part due to the conclusion of recovery action in relation to the failure of Keydata Investment Services Ltd.
This is balanced by a provision of £2.5 million to seek recoveries in respect of missold PPI. The PRA says this potential action would be funded by the insurance intermediary class, who would receive the benefit of any such recoveries.
The expected value of compensation paid out during 2015/16 is £311.5 million, according to the latest FSCS Outlook from November 2015.
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