As you may have noticed, FSCS has just published our annual business plan and, alongside it, a strategy for the next five years.
If you read the press, the one thing you’ve probably picked up is that we’ve announced our indicative levy for 2014-15 of £313 million.
That’s little different from the total levies we expect to raise this year.
But by any standard it’s a large number. We are very conscious that these are costs which fall on the industry, including on many small firms.
So what is the industry getting in return?
The fairly obvious answer is a compensation service: FSCS protects consumers who lose money when financial services businesses fail.
But paying compensation is, in reality, a very important means to a couple of even more important ends.
Those ends are confidence in financial products and, particularly at times of stress, financial stability.
We know that people who are aware of FSCS protection are more confident about buying financial products. Awareness of protection also reduces the risk of a liquidity run of the kind we saw when Northern Rock got into difficulty in 2007.
The strategy which we’ve published for the next five years sets out how we believe we can deliver these ends in ways which better serve consumers, while also providing better value for money to the industry.
In fact, achieving value for money is one of the strategic imperatives we’ve set ourselves for the next five years. We understand that our levy payers expect us to achieve the same efficiency gains in our business as they are delivering in theirs.
One key to doing that is our business model of outsourcing the great majority of claims we receive. This is the most efficient way of responding to our volatile and unpredictable workload by drawing on spare capacity in other, larger organisations.
FSCS itself has a core staff of only 200.
We are also able to exploit competitive tension between our panel of outsource partners to maintain downward pressure on costs and upward pressure on customer service.
Another key is the investment we are making – we call it Project Connect – in our claims handling process. This will enable consumers, for the first time, to make claims to FSCS on-line. And as an increasing proportion of claims, and the supporting evidence, come to us electronically, we shall be able to work more efficiently with our outsource partners.
We also work hard to offset the costs we impose on the industry by maximising recoveries from the estates of failed businesses. Because we take over the rights of the consumers we compensate, we are often the major creditor.
We bring to bear both legal and financial expertise on this task. We will only pursue recoveries where we have a reasonable prospect of success and where the recoveries we can achieve exceed the costs of pursuing them.
Since 2008 FSCS has recovered over £3.5 billion. We either return this money to the relevant industry sector or use it to reduce our liabilities.
So FSCS is performing an important service for consumers on behalf of the industry. But we are very conscious that we acting on the industry’s behalf and need to demonstrate our value for money.
I hope you will read our Vision for the next five years.
The Financial Conduct Authority website includes a searchable database of all firms authorised and regulated by the FCA and the Prudential Regulation Authority (PRA).