The Financial Services Compensation Scheme is having a disproportionate impact on small firms, the UK boss of HSBC and FCA practitioner panel chair Antonio Simoes has told MPs.
Mr Simoes, the HSBC UK and Europe chief executive, told the committee that the levy is unfair on smaller firms, with the Financial Conduct Authority practitioner panel chairman deeming rising regulatory costs “unsustainable”.
He argued that the FSCS levy “disproportionately impacts smaller firms”, adding that more predictability in terms of levies “would be desirable”.
However, he admitted that his panel has previously focused on the broader cost of regulation and had not discussed the issue since he took over in July.
“As a panel we have not discussed the FSCS as much, what we have discussed is the overall cost,” he told the committee. He criticised this year’s 7.9 per cent increase in FCA costs.
Committee chairman Andrew Tyrie challenged the FCA’s smaller business practitioner panel to provide some solutions to rising adviser fees and levies, following evidence from the panel’s chairman and Citywide Financial Partners director Clinton Askew.
Mr Askew revealed his own firm’s FSCS bill rose by 300 per cent this year.
“We have definitely been concerned about it. It’s insurance cover that protects without reference to the underlying risk,” he said.
Mr Askew said while small firms were not yet being put out of business by the FSCS levy, many were struggling and therefore the issue needed looking at.
Mr Tyrie responded that “We hear the moaning and we can be sympathetic, but what we need is to hear some answers”.
He said that after having had FSCS chief executive Mark Neale in front of the panel in September, the view at the time was that the FSCS was insurance cover priced without reference to any underlying risk.
“One of the problems Mark Neale has is that he can’t make recoveries from professional indemnity insurers because their contracts specifically write out claims from the FSCS, so in a way there are mechanisms that could alleviate some of the problems for advisers,” added Mr Tyrie.