Perhaps, like me, you find reading other organisations’ annual reports a wearisome business. Reports are often long, predictable and written in uninspiring official prose.
Well, I’m not going to make the impossible claim that FSCS’ Annual Report, published on 4 July, is a thundering good read. It is, after all, a document of record and suitably sober.
But some things about it are different and worth a look.
For one thing, it only comes in an e-format and so is very easy to navigate. There’s no need to lug a glossy book home in a briefcase.
For another, the Report says some important things.
Look, for example, at the Chair’s introduction which outlines Lawrence Churchill’s four key priorities.
These all bear in one way or another on strengthening FSCS as a force for financial stability by deepening our relationships with key stakeholders.
Among these are levy payers: Lawrence and I are at one in believing that FSCS must retain the support of the industry that funds us and that the way to do that is to be as transparent as possible about our performance and costs.
FSCS also needs to be embedded in the UK’s arrangements for resolving failing banks, building societies, insurance companies and other systemically important businesses.
Orderly resolution depends on protecting insured depositors and policy holders. But there is no reason why that protection should always take the form of a pay-out – though FSCS can now achieve that in seven days.
Consumers and levy payers might be better served by a transfer of accounts or policies to another provider: FSCS can finance that as it did with the transfer of Bradford & Bingley’s deposits to Santander in 2008. FSCS might even, in some circumstances, support the recapitalisation of a failing business though a “bail-in” where that offers better value for levy payers.
At any event, we need to plan for a range of contingencies. And we also need to do more to raise public awareness of FSCS protection because people will not be reassured by a service they don’t know about.
So we shall continue to work with the industry to give much more prominence to the protection we provide. The evidence is that the more aware people are of FSCS, the more confident they are about buying financial products. Although there is more to do, it is important to remember that the industry is improving how it communicates about FSCS, with some now including us in their marketing and advertising. We thank them, and all firms, for their ongoing support.
Alongside the Chairman’s priorities, you will, of course, find a good deal of more conventional information about how FSCS operates.
A core requirement of our business model is the ability to deal with unpredictability. So in 2012-13, FSCS dealt with fewer claims than the previous year – mainly because we are through the peak of Welcome claims – but the complexity and cost of claims rose as we tackled the fall-out from some complex investment failures. Think MF Global, Arch Cru, World Spreads and so on.
This volatility is why we outsource the handling of the great majority of claims we receive. Our partners are much better placed to absorb changes in demand – providing or withdrawing capacity as needed – than a small organisation like FSCS with our permanent complement of around 180 people.
It’s central to our ability to hold down the costs we pass onto the industry. And it’s another good reason to read the Report.
The Financial Conduct Authority website includes a searchable database of all firms authorised and regulated by the FCA and the Prudential Regulation Authority (PRA).