FSCS pays £473m in compensation to customers of failed firms during 2018/19

Maria Nikolova

This is compared with the £405 million FSCS paid in compensation in the previous year.

The UK Financial Services Compensation Scheme (FSCS) has earlier today published its 2018/19 Annual Report, with the document showing the Scheme paid a total of £473 million in compensation to 425,760 customers of failed firms during 2018/19. This amount compares with the £405 million FSCS paid in compensation in the previous year.

FSCS’s Report also shows the body raised levies on 49,224 regulated financial services firms, with a total levy income of £517 million, to fund the costs of compensation and of running the Scheme.

During the year FSCS recovered £4.7 billion from Bradford & Bingley, to repay the remaining borrowing from HM Treasury provided for the 2008/09 banking failures. To reduce the burden on industry, a further £26 million was recovered from other failures; and FSCS continued to monitor and pursue other available recovery opportunities.

SIPP related claims kept rising, as FSCS paid £123 million in compensation, £11 million higher than in 2017/18. Overall, the Scheme paid £157 million in the Life and Pensions Intermediation Class, necessitating a supplementary levy of £78 million which was funded by the retail pool. The rise in SIPP related claims contrasts with the fall in Payment Protection Insurance claims, as the amount paid in compensation for PPI claims was £11 million, down £5 million from the previous year.

The failure of Alpha Insurance was responsible for the large number of premiums returned to customers in 2018/19 – 371,000 – compared to 27,000 in 2017/18. Alpha Insurance was declared in default on May 8, 2018, shortly after the final levies were announced. This necessitated FSCS to raise a supplementary levy of £14 million, at the same time as the retail pool levies were collected in January 2019.

Regarding deposits, FSCS paid £29 million to customers of deposit taking firms. Of this sum, £22 million was paid to customers of Dial-A-Cab Credit Union – one of eight Credit Unions that failed in 2018/19 – and the largest deposit taker failure since the crisis. To cover the failure of Dial-A-Cab, FSCS raised a supplementary levy on the Deposits class of £13 million in January 2019.

Caroline Rainbird, FSCS’s Chief Executive, said: “We recognise that we were only able to pay compensation to so many thousands of people because of the firms who paid our levy, and the diligent work of FSCS staff who successfully pursued recoveries from the estates of failed firms. Our customers, the wider financial services industry and consumers, are always central to our decision-making process.

“As we continue to see a rise in SIPP related claims we are working with our partners in industry through our Prevent pillar to gain valuable insight into the causes of firm failures and about the directors and advisors involved in mis-selling.”

Read this next

Retail FX

Malaysia regulator exposes OctaFX clone, shady FB profiles

Malaysia’s financial regulator today warned online investors about the risks of following investment tips made on social-media platforms.

Digital Assets

Crypto trading volume spikes at Swiss bourse amid FTX collapse

The shockwaves from the historic collapse of Sam Bankman-Fried’s crypto empire are still being felt across the industry, but some trading venues are actually doing better because of it.

Executive Moves

CMC Markets adds Camilla Boldracchi to institutional sales

UK’s biggest spread better, CMC Markets has promoted Camilla Boldracchi to take on an expanded role within its institutional sales desk.

Institutional FX

FXSpotStream reports $1.48 trillion in monthly volume for November

FXSpotStream’s trading venue, the aggregator service of LiquidityMatch LLC, reported its operational metrics for November 2022, which moved higher on a yearly basis but reflected weak performance across executed trade volumes when weighed against the figures of the prior month.

Retail FX

Interactive Brokers’ client activity drops 30% YoY

Interactive Brokers LLC (NASDAQ:IBKR) saw 1.95 million daily average revenue trades, or DARTS, in November 2022 compared to 1.96 million transactions in the prior month.

Digital Assets

The rise of Crypto ETPs in traditional exchanges as crypto winter deepens

Institutional investors are increasingly looking at traditional regulated exchanges as their first route into digital assets amid market turmoil caused by the crypto winter and the collapse of several big names within the space, including FTX. Acuiti and Eurex surveyed 191 buy and sell-side firms on their views of the digital assets markets in order […]

Digital Assets

TP ICAP’s crypto arm receives FCA’s go-ahead

UK interdealer broker TP ICAP has received a regulatory go-ahead to launch its cryptocurrency services in the UK. The bid shows that the recent collapse of FTX exchange has done little to damp the interest of big names in running their own crypto business.

Industry News

Coin Signals founder to pay $2,847,743 after prison sentence over crypto Ponzi scam

The U. S. District Court for the Southern District of New York has ordered Jeremy Spence, founder of Coin Signals, to pay $2,847,743 in restitution to victims of a fraudulent virtual currency scheme.

Digital Assets

CME Group goes DeFi: Reference rates and real-time indices of Aave, Curve, Synthetix

“These rates are designed to provide traders, institutions and other users transparency and price discovery across a much broader range of tokens, allowing them to confidently and more accurately value cryptocurrency sector specific portfolios and manage price risk around various blockchain-based projects.”

<