The Prudential Regulation Authority and Financial Conduct Authority have stated that neither of them are able to request a National Audit Office of the Financial Services Compensation Scheme, according to a policy statement.
The PRA final policy statement was on the final management expenses levy limit for the FSCS for 2015/16, which has been approved by both regulators as £74.4m, following a consultation launched in January.
The paper also detailed several responses to its consultation on the levy limit, with one requesting that the NAO conduct a value for money audit on the FSCS, its strategic projects and the Keydata recovery action.
The regulator stated that it cannot require this, although the compensation scheme and its change programme are subject to scrutiny by their external auditors.
There was a question on the increase in costs of scheme’s continuing operations, despite the downward trend in the expected claims.
In response, the document stated that the FSCS confirmed the 3.7 per cent increase is a reflection of the nature of the claims that expected in 2015/16 and that it has seen an increase in more complex claims, which unlike the majority of the previous year’s claims, require considerable assessment and manual processing.
“It is expected that claims processing costs will reduce on a like for like basis in the future,” it added.
The costs of its internal change programme were also questioned, with the response that these will wind down after 2015/16 and the FSCS expects to see a reduction in claims processing costs in the future.
The final management expenses levy limit covers the FSCS management budget of £69.1m, which itself covers such items as staff and building costs, operating expenses, IT, outsourcing and claims handling.
It also includes a contingency reserve of £5.3m for management expenses that allows the FSCS to levy additional funds, most likely at relatively short notice, without formal consultation by the PRA and FCA, to meet contingencies that were not foreseen when the annual levy was raised.
Earlier this month, the FSCS confirmed one such £20m interim levy for life and pensions intermediaries relating to “bad advice” given on self-invested personal pensions.
Advisers across the investment and life and pension intermediation sub-classes will have to suck up a levy of £182m for the year ahead, 25 per cent more than this financial year, despite predictions investment claims in particular will fall sharply.
peter.walker@ft.com
