FSA imposes £80m compensation levy
The Financial Services Authority is to charge investment intermediaries
an extra £80 million to compensate people who lost money when several
firms, including Pacific Continental Securities (UK), collapsed.
The money will be levied on top of the annual contribution they also
have to pay into the scheme and will be split between members.
The first £58 million of the interim fee will meet the costs of
compensating consumers who lost money when PCS (UK), Square Mile
Securities and Keydata Investment Services, as well as other investment
companies, went into default and were liquidated.
The £22 million that is left over will cover compensation claims for
people who were mis-sold structured products by firms which have
previously gone under.
But the Financial Services Compensation Scheme has decided not to
impose an interim levy on insurance intermediaries to cover the cost of
compensation for the mis-selling of controversial payment protection
insurance (PPI) by firms that have been declared in default.
These costs will instead be met through the general levy on the sector for 2010/2011.
The scheme said PPI claims were a growing area of its work and would be
one of the main drivers of costs during the coming financial year.
Alex Kuczynski, interim chief executive, said: "The costs of PPI,
investment and insurance claims are among the main drivers of FSCS
costs this year and into 2010/11.
"After further refining our assumptions, we have set the levy for the coming year at £148 million.
"Our duty is to help consumers of authorised financial services firms
who are entitled to our protection. This is good for consumer
confidence and benefits the industry."
Within the total levy of £148 million, the general insurance sector
will pay £41.5 million to cover the ongoing claims costs relating to
Builders Accident Insurance, Chester Street, Drake Insurance and
Independent Insurance.
On top of the general levy, companies which take deposits also have to
pay £376 million to cover the interest on a Government loan which was
taken out to pay for compensation to consumers following the collapse
of the Icelandic banking sector and Bradford & Bingley.