IMA: Banks should pour £165m into FSCS pot

Banks should have their Financial Services Compensation Scheme (FSCS) contribution raised to £165 million, the Investment Management Association (IMA) has said.

In its response to the Financial Services Authority's FSCS funding review, the IMA said fund managers make contributions based on what they can afford, while other providers' contributions are based on fees.

The IMA said this leaves fund management firms open to the risk of paying a cross-subsidy three times as large as insurers.

Based on a series of calculations, the IMA said: 'This should be reviewed and the cap for general insurance firms' cross-subsidy into the pool raised to £52 million, for life insurance to £105 million, and for banks it should be raised to £165 million.'

Once the FSA has been dissolved, the Prudential Regulation Authority and Financial Conduct Authority (FCA) will share the supervision of the City and its practices, with the FCA looking after consumers' interests, including the FSCS.

The IMA said while it is pleased PRA-regulated firms, typically deposit takers and firms that could pose a systemic risk, will contribute to the FSCS under the proposals put forward in the compensation scheme's review, more could be done.

It said there was still room to 'further strengthen' the FSCS, particularly the size of contributions and the certainty of these.