31st October 2016

FSCS levy and some blue sky thinking.

We hear that the new chief executive, Andrew Bailey, has confirmed the introduction of a product levy will be considered as part of the regulator's upcoming consultation on the funding of the Financial Services Compensation Scheme.

The time is right for Mr. Bailey to also consider (alongside this very sensible idea that always seems to get ‘kicked’ into the long grass) the use, or in reality, the miss use of banking fines in this consultation? 

FCA fines were to be used to offset the cost of regulation. But not any more. 

Why, well here’s the thing as they say. 

Over the last century or two the nations wealth and success was built on our vast below ground natural resources.

Coal, tin, oil, sand, cement, gravel extraction have all played their part but many fear that these resources have a limited life as dwindling stocks make it more expensive to recover.  

Alongside all natural resources there is a tax raising opportunity but if stocks of natural resource reduce or become exhausted this will, in turn, see tax revenues reduce and that spells trouble for HM Treasury.  

But the nation has turned to another ‘natural resource’ because of some very clever HM Treasury ‘fine-fracking’ on the part of the last government 

This table contains the FCA’s own information about fines published during the calendar year ending 2016 and up to the 12^th October.

The total amount of fines levied so far in 2016 is £22,127,442. 

• In 2015 £905,219,078 was levied
• And in 2014 £1,471,431,800 was levied.

The FCA will deduct its costs from these huge amounts and the rest will go to HM Treasury. The FCA was obliged by statute to pay away £1.370bn of the 2014 fines to the Treasury, the equivalent of 70% of all alcohol and tobacco levies for 2014. 

In April this year the FSCS announced a £337m levy for 2016/17.

The FSCS levy in 2015/16 totaled £319m.

So over the last 3 years some £2.4bn in fines has been levied that could have seen zero FSCS levy for a good number of years with the polluter paying. Just do the math! 

Banking fines should be used to reduce the burden of regulatory cost, in particular that of the ‘oh so’ contentious FSCS levy that hits, in particular, small IFA businesses the hardest. 

Any thoughts yourself? 

Do let us know here via our quick survey, details will be shared with Mr. Bailey.

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