The Financial Conduct Authority has been considering increasing the amount compensation available from the Financial Services Compensation Scheme but said there needs to be a limit for higher risk products too.
Currently, the Financial Services Compensation Scheme limit is set to £85,000, however the FCA is currently reviewing feedback to its compensation framework review.
It is considering whether increasing this amount would be more appropriate.
Speaking at the FCA’s annual public meeting today (October 4), Nikhil Rathi, chief executive officer at the FCA, said: “It's a very wide ranging question and it covers both the level of compensation but also the scope of compensation and the speed with which compensation is provided to consumers.
“A couple of years ago, we launched a compensation framework review, which is really a very open discussion to the debate about where we should go with the compensation system, looking at what happens in the UK but also what happens internationally as well.”
Rathi explained that the regulator recognises that the compensation system in the UK is funded by levies on the industry.
He explained that recently, the regulator has also looked at the scope of compensation in specific areas such as long term asset funds.
He said it looks at whether the FSCS should alos cover those funds as the new products are there to support productive financing of the economy and long term illiquid assets that may invest in infrastructure, or other critical areas for growth in the economy
“We're considering the responses to those consultation documents as well,” he said.
“One point we have made in the area of crypto assets is that these products are very high risk and as elements of the crypto complex come into our regulation, most recently in relation to promotions, we have been reinforcing the message that anybody who invests in those products must be ready to lose the money that they put in.
“There needs to be limits to the availability of compensation for such high risk products too.”
Rathi explained there were issues there about limits around scope and operations and the regulator is considering all of that feedback, but there's nothing imminent planned at the moment.
Meanwhile, the FCA said it is also doing some work with the Bank of England and the Treasury in light of the collapse of Silicon Valley Bank to look at not just the compensation level, but also the importance of continuity of having access to deposits when a bank fails.
“There were clearly lessons to be learned from that experience as to how to make sure in those kinds of scenarios, firms, businesses, individuals can keep access to their deposits,” he said.
Last week, at the FTAdviser Financial Advice Forum, Lila Pleban, chief communications officer at the FSCS, said it estimates that £70mn in compensation is "lost" due to the fact its limit for pay outs is too low.
Pleban said the FCA was looking into increasing this limit - which is currently set at £85,000.
sonia.rach@ft.com
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