COMP 13.4 The FSCS's power to impose levies

The FSCS may at any time impose a management expenses levy or a compensation costs levy, provided that the FSCS has reasonable grounds for believing that the funds available to it to meet relevant expenses are, or will be, insufficient, taking into account:

1. (1)

   in the case of a management expenses levy, the level of the FSCS's anticipated expenditure in respect of those expenses in the financial year of the compensation scheme in relation to which the levy is imposed; and

2. (2)

   in the case of a compensation costs levy, the level of the FSCS's anticipated expenditure in respect of compensation costs in the 12 months following the levy.

The FSCS must not require a participant firm in the accepting deposits sub-scheme to pay a share of a compensation costs levy allocated to that sub-scheme to the extent that:

1. (1)

   the share in question; plus

2. (2)

   all previous amounts paid by the firm either as its share of levies allocated to that sub-scheme, or under the Deposit Protection Scheme (deducting from those amounts any amount refunded under COMP 13.4.17R - COMP 13.4.18R or by the Deposit Protection Scheme);

amounts to more than 0.3% of the firm's protected deposits.

The FSCS must not require a participant firm in the insurance business sub-scheme to pay a share of a compensation costs levy allocated to that sub-scheme in any financial year of the compensation scheme, to the extent that the share in question, together with all previous amounts paid by the firm as its share of compensation costs levies allocated to that sub-scheme in that financial year, amounts to more than 0.8% of the participant firm's relevant net premium income.

The maximum amount of compensation costs for which the FSCS can levy the designated investment business sub-scheme in any one financial year of the compensation scheme is limited to £400 million.

3The FSCS must not require a participant firm in the mortgage advice and arranging sub-scheme to pay a share of a compensation costs levy allocated to that sub-scheme in any financial year of the compensation scheme, to the extent that:

1. (1)

   the share in question; plus

2. (2)

   all previous amounts paid by the firm as its share of compensation costs levies allocated to that sub-scheme in that financial year;

amounts to more than 0.8% of the participant firm's annual eligible income.

3The FSCS must not require a participant firm in the general insurance mediation sub-scheme to pay a share of a compensation costs levy allocated to that sub-scheme in any financial year of the compensation scheme, to the extent that:

1. (1)

   the share in question; plus

2. (2)

   all previous amounts paid by the firm as its share of the compensation costs levy allocated to that sub-scheme in that financial year;

amounts to more than 0.8% of the participant firm's annual eligible income.

The FSCS may include in a compensation costs levy the costs of compensation paid by the FSCS in error, provided that the payment was made in good faith.

The FSCS must hold any amount collected from a specific costs levy or compensation costs levy to the credit of the sub-schemes and relevant contribution groups, in accordance with the allocation established under COMP 13.5.6 R and COMP 13.6.2 R.

Any funds received by the FSCS by way of levy or otherwise for the purposes of the compensation scheme are to be managed as the FSCS considers appropriate, and in doing this the FSCS must act prudently.

Interest earned by the FSCS in the management of funds held to the credit of a contribution group must be credited to that contribution group, and must be set off against the management expenses allocated to that contribution group.

The FSCS must keep accounts which show:

1. (1)

   the funds held to the credit of each sub-scheme and relevant contribution group; and

2. (2)

   the liabilities of that sub-scheme and relevant contribution group.

The FSCS may use the money collected from firms within one sub-scheme to pay compensation costs in respect of any contribution group within that sub-scheme, so long as it ensures that this is done without prejudice to the participant firms from whom the money has been collected.

1. (1)

   The FSCS may use any money held to the credit of one sub-scheme (the creditor sub-scheme) to pay compensation costs in respect of another sub-scheme (the debtor sub-scheme) if the FSCS has reasonable grounds to believe that this would be more economical than borrowing funds from a third party or raising a levy.

2. (2)

   Where the FSCS acts in accordance with (1), it must ensure that:

   1. (a)

      the creditor sub-scheme is reimbursed by the debtor sub-scheme as soon as possible;

   2. (b)

      the debtor sub-scheme pays interest at a rate equivalent to the Bank of England's repo rate from time to time in force; and

   3. (c)

      the amount lent by the creditor sub-scheme to the debtor sub-scheme is taken into account by the FSCS when considering whether to impose a compensation costs levy on the creditor sub-scheme under COMP 13.4.1R.

1. (1)

   1The FSCS may use any money held to the credit of any sub-scheme to repay borrowing from a third party incurred to pay establishment costs, if in the opinion of the FSCS this would be to the benefit of participant firms.

2. (2)

   Where the FSCS acts in accordance with (1), it must ensure that:

   1. (a)

      future establishment costs levies are used first to repay all amounts borrowed from the appropriate sub-schemes;

   2. (b)

      interest is paid to the appropriate sub-schemes at a rate equivalent to the Bank of England's repo rate from time to time in force; and

   3. (c)

      the amount lent by any sub-scheme is taken into account by the FSCS when considering whether to impose a levy under COMP 13.4.1 R.

UnlessCOMP 13.4.17 R applies, any recoveries made by the FSCS in relation to protected claims must be credited to the contribution groups to which the related compensation costs were allocated.

If the FSCS makes recoveries in relation to protected claims where the related compensation costs were allocated to the accepting deposits sub-scheme, or in relation to compensation paid out of a special contribution under the Deposit Protection Scheme, and if the FSCS refunds the recoveries underCOMP 13.4.18 R, it must ensure that, as far as possible, the recoveries are refunded to the firms that contributed to the relevant compensation costs levy or special contribution (whether or not the firms are participant firms at the time that the recoveries are made).

If the FSCS has more funds to the credit of a contribution group than the FSCS believes will be required to meet levies on that contribution group for the next 12 months, it may refund the surplus to members or former members of the contribution group on any reasonable basis.

The FSCS may adjust the calculation of a participant firm's share of any levy to take proper account of:

1. (1)

   any excess, not already taken into account, between previous levies of that type imposed in relation to previous periods and the relevant costs actually incurred in that period; or

2. (2)

   participant firms that are exempt from the levy under COMP 13.3; or

3. (3)

   amounts that the FSCS has not been able to recover from participant firms as a result of COMP 13.4.5R or COMP 13.4.6R; or

4. (4)

   amounts that the FSCS has not been able to recover from participant firms after having taken reasonable steps; or

5. (5)

   COMP 13.5.8R (New participant firms), COMP 13.4.20R (Remission of levy) or COMP 13.7 (Incoming EEA firms); or

6. (6)

   anything else that the FSCS believes on reasonable grounds should be taken into account.

If a participant firm's share of a levy or an additional administrative fee under COMP 13.8.4 R would be so small that, in the opinion of the FSCS, the costs of collection would be disproportionate to the amount payable, the FSCS may treat the participant firm as if its share of the levy or additional administrative fee amounted to zero.1

The FSCS may impose a levy on the Society to be calculated as the aggregate of the levies that would be imposed on each member if this chapter applied to members, as follows:

1. (1)

   a share of any unexpired portion of an establishment costs levy;

2. (2)

   a proportionate share of a base costs levy in respect of the compensation scheme's costs for the period from 1 January 2004 to the end of the compensation scheme's financial year and a share of such levies for all subsequent financial years;

3. (3)

   a specific costs levy and a compensation costs levy in respect of costs arising out of a relevant person being in default, arrangements made under COMP 3.3.1 R or measures taken under COMP 3.3.3 R where:2

   1. (a)

      the default occurs or the circumstances giving rise to the arrangements being made or the measures being taken, as the case may be, occur; and2

   2. (b)

      the protected contracts of insurance in connection with which the costs arise were entered into;2

   on or after 1 January 2004.2