FCA chairman John Griffith-Jones has backed a “polluter pays” funding model for the FSCS and revealed the regulator will explore offering firms a ‘no claims bonus’.
At a media briefing yesterday Griffith-Jones listed alternatives to how the scheme is currently funded – through an annual levy based on different classes of business – including a pre-funding model or having fewer funding “buckets” across broader categories.
He said advice firms have suggested a model that gives a discount for good behaviour if their business has never had a claim.
Griffith-Jones said: “It is a perfectly sensible, plausible question. The issue is who is going to administer it. The FSCS would have to be a much bigger organisation – or someone would have to decide who gets a no claims bonus.”
He stressed the FCA has no preconceived ideas about what funding model would be best for the FSCS.
He said: “The polluter pays argument is a pretty good one. How you would do it – if we thought it had merit – then you would have to go from concept to reality. There is a lot of reality to be worked through for that to be done but I cannot deny it is a plausible solution.”
The funding review was confirmed in the Financial Advice Market Review in March. The most recent FSCS funding review was conducted in 2012 but Griffith-Jones says that investigation was carried out in a different environment.
He said: “[In 2012] all of the focus was on what happens if another bank goes bust and protecting advisers from another bank getting into difficulty.”