global insurance management

Compulsory FSA Levy

Mar 31 2011

Relevance:             All Regulated firms

Action required:     None at this stage, for information only.

The Financial Services Authority (FSA) will issue a compulsory levy to raise £25 million to build up the reserves of the Financial Ombudsman Service (FOS). The compulsory levy will be impose in June after ‘consultation’ on the proposal in February.

The regulator has moved to bolster the reserves of the FOS over concerns that the Ombudsman could run out of cash in just six weeks if banks facing payment protection insurance (PPI) claims refuse to pay its case handling fee.

‘We need to increase our financial reserves by £25 million, as a contingency against the costs of growing volatility – of which the latest example is the range of issues around cases involving payment protection insurance,’ stated the FOS.

The FOS said the £25 million will only be used to insulate it from volatility of its income and cost and would not be used to tackle routine issues. The FSA has not concluded how the £25 million levy will be allocated.

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