Not all failures are the same
You probably assume that FSCS’ workload is dominated by claims for compensation.
We receive claims from individual consumers or their representatives, consider each claim on its merits to assess whether a failed firm had a liability to the consumer and either accept or reject the claim.
Of course, many of our claims do follow this pattern, but by no means all.
On the contrary, in many cases, FSCS is able to compensate consumers automatically without the need for a claim or, even better, to secure a continuing service for consumers.
Our protection for savers in failed, banks, building societies and credit unions is a good example of automatic compensation. Thanks to the Single Customer View (SCV) files maintained by all deposit-takers, FSCS is able to return people’s savings in seven days – usually faster. We have achieved this with nine credit unions already this year.
Automatic pay-out does not, however, guarantee continuity. At best, our customers must pay our cheque into a second bank account; at worst they must open a new account.
But in many cases we do strive – and achieve – continuity for our customers as part and parcel of our protection.
Two cases stand out so far in 2018.
The first is Beaufort Securities.
This was a broker dealer which failed in March of this year. I described in an earlier blog, the steps which FSCS took to ensure that the costs of returning clients’ money and assets were properly scrutinised.
As a result of our engagement with the special administrators, PwC, and as a member of the creditors’ committee, were able to ensure that the great majority of Beaufort’s clients would be compensated in full for these costs.
Our protection, however, ultimately went well beyond that. Working with PwC, we were able to arrange for the transfer of the money and assets belonging to 12 000 clients to another nominated broker, The Share Centre Limited.
This means that the clients concerned will now be able to continue to manage their investments.
My second example is the Alpha Insurance Company which failed this May.
Alpha was a Danish company which insured a wide range of risks in the UK. Many UK policy holders were covered by the Danish Guarantee Scheme, but not all. In particular, the Danish scheme does not cover businesses, so firms with a turn over of less than £1m have FSCS protection.
This complex pattern of overlapping protection meant that it was critical that FSCS, the Danish Guarantee Scheme and UK insurance brokers worked together to protect UK policy holders.
That is exactly what we have done.
One outcome of that collaboration was a deal, concluded in August, to transfer 177 000 Guarantees Asset protection policies to a Lloyds of London syndicate. These are policies which cover motorists for the cost of depreciation in the event that a new car is written off.
The cost of the replacement cover was shared between the FSCS and the Danish Guarantee Scheme
Another good example, in other words, of FSCS working with partners not just to protect our customers but to secure continuity of service.
So, yes, FSCS handles ten of thousands of individual claims every year. But we also protect people in many other ways too.