Consultation Paper CP12/16 was published on 25 July, setting out the FSA's proposals to change the funding model currently operated by the Financial Services Compensation Scheme (FSCS). These changes have come about as a result of industry concerns over the high levies that have been put in place by the FSCS, following a number of significant failures of financial services firms over recent years. The proposals outlined in CP12/16 have been designed to fit in with the way the Prudential Regulation Authority and Financial Conduct Authority will operate when the UK's new regulatory system comes into play in early 2013.

In CP12/16, the FSA states that it intends to continue with the existing FSCS funding class structure, as it can see no suitable alternative. However, a number of changes have been proposed in relation to the maximum amount that each class may be required to pay in any given year. The FSA is also proposing to amend the method for determining the amount of expected compensation costs that can be included in the annual compensation costs levy and extend the forecast period from 12 to 36 months for all classes, except deposits. No changes will be made to current tariff measures because the FSA is not convinced of the benefits of using alternative methods, for example product levies.

The FSA has asked for responses to CP12/16 by 25 October 2012. The final changes are expected to come into effect from 1 April 2013.