Treasury select committee chairman Andrew Tyrie has said he is “in the market” for ways of making the FSCS levy fairer.
He was speaking after his committee heard evidence from the FCA’s practitioner panels on the levy system as well as criticism, particularly from Clinton Askew, the chairman of the smaller business panel.
Mr Tyrie said the FCA had made “reasonable points” about the levy and added that the industry needed to come up with a sensible alternative.
During the hearing, committee member and Conservative MP Mark Garnier asked Mr Askew whether he had seen firms stretch their regulatory capital requirements to pay for the levy.
Mr Askew, who said the liability of his own financial advice firm had gone up 300 per cent, said there was evidence of this happening.
He added: “I do think that, given there is a higher capital adequacy requirement coming in, some firms will be affected by it.
“The challenge with the FSCS levy is how it is sliced up between the various parties. At the moment, given the funding model we have, the question seems to be how much pie you’re going to get rather than whether the pie is the right solution at all.”
After this exchange, Mr Tyrie intervened and said: “We are hearing the moaning and we can be sympathetic, but what we need is to hear some answers. The FCA has got a problem too.
“They are making some quite reasonable points when they come before us on both fronts.
“What is a sensible solution and can you strip out any moral hazard in a compensation scheme? You don’t need to answer that question now but that’s what we’re in the market for.”
Mr Askew said he and his panel would think about potential solutions.
Antonio Simoes, chairman of the practitioner panel and chief executive of HSBC Bank, said increases in the FCA’s fees were “not sustainable” and he had encouraged the regulator to think about value for money.
He said: “The FSCS, it is fair to say, disproportionately affects the smaller firms.
“Personally speaking, more predictability would be desirable, but we have not discussed this as a panel it so it is not the view of the panel.”
In October, John Griffiths-Jones, chairman of the FCA, said fairness for financial advisers would be a key part of the FCA’s upcoming review of the FSCS levy.
Adviser view
Petra Griffiths, director of East Sussex-based PSG Financial Solutions, said: “I think every adviser thinks the FSCS levy is unfair because it keeps going up and up, and we are being punished for things we have not done.
“It should be funded from the fines imposed by the FCA rather than the money going straight to the Treasury.”
