One of the great things about being asked to speak is that it concentrates the mind. It’s like writing an undergraduate essay.
That’s especially true if you’re speaking at lunch or dinner without the usual props of PowerPoint slides. It means you have to boil down your message into something succinct and memorable.
At any event, that was the challenge I faced when I spoke at Building Society Association (BSA) annual lunch earlier in the month.
You want to say something substantive; it’s not an after-dinner speech. But the audience doesn’t want a lecture either – not after a good lunch.
So my approach was to home in on the three or four conditions which needed to be in place if FSCS was to be effective as a force for financial stability.
I characterised those conditions as: visibility, reliability, flexibility and credibility.
Visibility is pretty obvious. FSCS provides people with reassurance: reassurance to buy financial products in the first place: reassurance not to pull their money out of a bank, building society or credit union in a crisis.
But people can only be reassured if they know about FSCS. As things stand, only about half of savers do know about the protection we provide for deposits.
That’s why our campaign, in partnership with the industry, to raise awareness of FSCS protection is so important. It’s a campaign which is paying dividends. We are seeing a steady increase in levels of awareness.
The promise of our protection must also have substance. We must deliver reliably.
And we do. Since 2011, 22 credit unions and one small bank have failed; FSCS has in every case compensated the great majority of their savers within a week. In the process we’ve paid out around £16m to 20,000 people.
If we ever had to, we could do exactly the same in response to a bigger failure.
And we must also be versatile: a pay-out is not always the best outcome for consumers who would prefer to have continuity of service. Try living your life for even a short time without a current account to receive your salary and make your payments!
So FSCS has to be ready to finance the transfer of accounts to another provider, as we did in 2008 with Bradford & Bingley’s accounts to Santander.
We should also look at other ways of accomplishing the same thing – by piggy-backing, for example, on the account switching arrangements.
And FSCS should be prepared to take part in other resolution arrangements where these offer greater continuity for consumers and better value for our levypayers. I would not rule out FSCS, as a creditor of a failed bank, building society or credit union, being “bailed-in” alongside bondholders and taking an equity stake as part of a wider re-capitalisation.
Finally, FSCS must be seen as credible by our stakeholders: consumers obviously, but also by the industry which pays for us. That places an onus on us to be transparent and accountable.
I hope this blog plays its part in exactly that.
The Financial Conduct Authority website includes a searchable database of all firms authorised and regulated by the FCA and the Prudential Regulation Authority (PRA).