The new chief executive of the Financial Conduct Authority (FCA), Nikhil Rathi, has said it will take two or three years to address the rising costs of the Financial Services Compensation (FSCS) scheme levy.
In his first appearance before the Treasury Select Committee, Mr Rathi was asked about the rising costs of the FSCS levy. The Treasury Committee chairman, Mel Stride, said it had received a “huge amount of correspondence” from concerned financial advisers saying they feared the rising levy cost could put them out of business.
Mr Rathi said the problem could be solved by higher levels of professional indemnity insurance for firms seemed to be “riskier”. However, he warned that this would only have an effect in two or three years time.
He acknowledged the burden the rising levy costs have put on the financial adviser community and “the strain it puts on specific firms.”
Under Mr Rathi’s solution, riskier firms would pay higher professional indemnity insurance premiums meaning that “when there is a failure there is insurance that avoids the bill falling onto the FSCS.” He did note that there were concerns that the professional indemnity market was not functioning as effectively as the regulator hoped but still said he sees insurance being the solution to the levy issue.
The Treasury announced the appointment of Mr Rathi as chief executive of the regulator in June and he started work in October.
He replaced Andrew Bailey who became Governor of the Bank of England in March. Previous to joining the FCA, Mr Rathi was director, Financial Services Group at the Treasury before joining the LSE. In his Treasury role he worked on the UK’s EU and international financial services interests.
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