When does FSCS raise a supplementary levy?
The decision to raise a supplementary levy has to be made taking into account the particular circumstances that are relevant at the time. While it is not, therefore, possible to state categorically the circumstances that would give rise to a supplementary levy, we feel it is important to reiterate the following guidance:
- FSCS will only raise a supplementary levy where it has reasonable grounds for believing that the funds available to it to meet relevant compensation costs or management expenses for the period until the next levy is due are, or will be, insufficient. We cannot levy in advance where there is not a reasonable expectation that we would have to deal with claims in a particular sector.
- Borrowing between classes or using our commercial facilities is generally only utilised as a way of managing short term cash flow, or where the amount of the funding shortfall is considered to be too small to warrant an interim levy.
- We would not normally expect to raise a supplementary levy on any class for an amount of less than £10m, and would give careful thought to amounts upwards to say £20m, especially if the compensation became due close to the end of the financial year.
- FSCS does not take levy decisions either to trigger, or otherwise affect, contributions between classes. The key purpose of the levy is to safeguard sufficient funding for known or reasonably expected costs, applied as within the rules.