UK Regulator Issues Consultation Paper On Risk-Based Levies For The Financial Services Compensation Scheme Deposit Class

On March 4, 2016, the PRA published a consultation paper proposing amendments to the Depositor Protection Part of the PRA Rulebook and a new Statement of Policy in relation to the Financial Services Compensation Scheme and the calculation of firm contributions to the Scheme. The consultation is relevant to UK banks, building societies, credit unions, overseas firms with PRA deposit-taking permission and the FSCS (UK's administrator of its Deposit Guarantee Scheme). Current PRA rules require the FSCS to calculate firm levies on the basis of covered deposits. The recast Deposit Guarantee Schemes Directive provides that contributions to a deposit guarantee scheme should also be adjusted relative to the risk incurred by each member of the scheme. The European Banking Authority issued Guidelines detailing methods for calculating contributions to schemes. In response to the EBA Guidelines, the PRA has set out, in appendices to the consultation paper, the methodology for calculating risk-based...