PRA has published a feedback statement and final rules on the FSCS Management Expenses Levy Limit (MELL) for 2020/2021.
In CP 1/20, the PRA and FCA consulted on a proposed MELL of £83.2 million for 2020/21, which included:
- FSCS management expenses of £78.2 million to cover its ongoing operating costs including staff, facilities, claims handling, legal and other professional services; and
- an unlevied contingency reserve of £5.0 million which allows the FSCS to levy additional funds at short notice in the event of a significant unexpected event, without needing for further consultation by the PRA and the FCA.
The Policy Statement confirms that the PRA received two responses to this CP which were relevant to the proposal consulted upon. One respondent queried the rise in operating costs over the past four years, and the feedback confirms that, as indicated in the CP, the volume and complexity of claims received have almost doubled over the past three years. To demonstrate the impact of this increase, the FSCS split its costs between volume driven costs and controllable costs. The feedback confirms that controllable cost increases for 2020/21 have roughly aligned with inflation at 1.7%.
With regards to the proposed increase in the FSCS’ additional full-time equivalent staff, the Policy Statement confirms that the FSCS have accounted for 18 new full-time staff to help handle the increasing number and complexity of claims. Most will work within operations, dealing with the increase in claims.
In relation to the request for justification on the maintained budget of £4 million for investment, the Policy Statement states that, as indicated in the CP, this budget focuses on improving claims processes. More detail on this has been offered in the FSCS’ Plan and Budget 2020/21.
Following analysis of responses, the change is to be implemented as consulted upon.