On 4 March 2016, the PRA issued a consultation paper CP7/16 on implementing risk-based levies for the Financial Services Compensation Scheme (FSCS) deposits class.

Currently, the FSCS is required to calculate firm levies solely on the basis of covered deposits.  However, the Deposit Guarantee Scheme Directive 2014/49/EU (DGSD) set out that contributions to a deposit guarantee scheme (DGS), such as the FSCS should be adjusted for the degree of risk incurred by each DGS member.

The European Banking Authority (EBA) has already published its guidelines on calculating contributions but the UK delayed implementing these requirements until 31 May 2016.

In its consultation paper, the PRA has now set out proposals to implement the requirements in the DGSD in which it intends to:

  • Amend requirements for the FSCS to adjust compensation cost levies for the degree of risk incurred by a DGS member (which will apply to levies from July 2017 onwards).
  • Publish a new statement of policy specifying how the PRA intends to calculate the degree of risk incurred by a DGS member.

The deadline for responses is 3 June 2016.