FSCS may be pre-funded; FOS role under scrutiny

The Treasury today proposes reforming the way the Financial Services Compensation Scheme (FSCS) is funded and announces a wide-ranging review of the role of the Financial Ombudsman Service (FOS) in a white paper suggesting a raft of dramatic changes to the banking sector.

In Reforming Financial Markets, it says a pre-funding arrangement that would see the industry contribute to the costs of the FSCS before a major failure occurs, rather than pay for it via raised levies after the event, may be better suited given the market events of the last 18 months. It says the arrangement would only affect the deposit-taking class, would not be introduced until 2012, and pledged initial levies would "not be set at a level which would compromise financial stability". Meanwhile, it says this is also an "appropriate" time to review the "governance and accountability"...