1.1 This Prudential Regulation Authority (PRA) Policy Statement (PS) provides the PRA’s final policy following Consultation Paper (CP) 1/23 – Financial Services Compensation Scheme – Management Expenses Levy Limit 2023/24 in the form of the PRA’s final rules for the Financial Services Compensation Scheme (FSCS) Management Expenses Levy Limit (MELL) for 2023/24 (Appendix 1).
1.2 The PRA received no responses to this consultation.
1.3 This PS is relevant to all FCA and PRA-authorised firms. It contains no material of direct relevance to retail financial services consumers or consumer groups upon which they might need to act.
1.4 In CP1/23, the FCA and the PRA consulted on the FSCS’ proposed MELL of £109.8 million for 2023/24. This included:
- the FSCS management expenses budget of £99.8 million to cover ongoing operating costs, including staff, facilities, claims handling, legal and other professional services, and a long-term investment plan; and
- an unlevied reserve of £10 million which allows the FSCS to raise additional funds at short notice to meet costs that were not foreseen, without the need for further consultation and rulemaking by the FCA and the PRA.
1.5 When CP1/23 was published, the FSCS forecasted an underspend of £6.3 million compared to the 2022/23 management expenses budget of £95.5 million. Since publication of CP1/23, the FSCS has confirmed that the forecast underspend is now £8.3 million. CP1/23 stated that if this forecast materialises, then these funds will be used to offset the levy for the relevant classes in 2023/24. Therefore, if this updated forecast materialises and the unlevied reserve is not utilised in 2023/24, then the total levy paid by firms will be £91.5 million.
1.6 Given that the FCA and the PRA have not received any responses to the consultation, the policy proposals presented in CP1/23 will be implemented as consulted on.
1.7 The MELL will apply from Saturday 1 April 2023, the start of the FSCS’s financial year, to Sunday 31 March 2024.
1.8 The FCA Board has also made its respective rule for the 2023/24 MELL.