FSA grilled over delayed FSCS review

The All Party Group on Insurance and Financial Services has expressed its disappointment that the regulator could miss the deadline for its review of the Financial Services Compensation Scheme (FSCS).

When grilling head of conduct Sheila Nicoll, Jonathan Evans MP cited the Insurance Age exclusive on the cost the postponed review and demanded to know the rationale behind postponement.

He said that the regulator had started work on the project in 2009 of its own volition but after three years it had failed to get anywhere near completion despite spending three quarters of a million pounds on it.

Ms Nicolls responded by saying that the FSA's examination had been put on hold due to prospective regulatory changes at EU and UK level. She said that "quite a lot of work" had been done already and that the all information gathered up to this point would not be wasted.

While she felt it was counterproductive to consult right now, Ms Nicoll said the FSA was "committed to a far reaching review" which would involve a number of improvements focusing on classifications of sub classes, thresholds and capabilities of subclasses and cross subsidation.

Finely balanced judgments
It is expected that an EU timescale will be revealed by end of the summer and Ms Nicolls promised that the regulator would then be able to move quickly, although when pushed she admitted the April 2012 deadline was unlikely.

"It is worth noting there are finely balanced judgments to be made here and a wide range of interested stakeholders. We don't want to do a rush job," she said.

Mr Evans also referred to a second story in Insurance Age when he criticised the FSA's focus on product intervention and TCF. He raised concerns over how the FSA was utilising its resources and argued that it was not concentrating its efforts on the most urgent areas.

Ms Nicoll denied the regulator was being distracted by other issues and reassured the group there were ample resources to conduct the review when the time was right.

Mr Evans warned the early day motion on the matter had raised real concern in the House and any possibility of completing the process by April 2012 would receive much support.

"Every year we continue this we are accepting the continuation of an injustice" he added.