FSCS has also recovered billions of pounds following the resolutions of the 2008 banking failures.
The UK Financial Services Compensation Scheme (FSCS) has earlier today provided some statistics about the recoveries made over the past several years.
FSCS has recovered just under £300 million over the past five years (that is, from FY 2014/15 to FY 2018/19 year to date) from failed financial services firms.
These sums reduced FSCS levies on the industry. Let’s note, however, that in January this year, the body published its Plan and Budget for 2019/20. Among other things, the document outlined FSCS’s initial forecasts for the levy financial services firms will pay next year, as well as supplementary levies it will raise on firms before the end of 2018/19. FSCS expects to levy the industry £516 million for 2019/20 – a 12-month period compared with £468 million FSCS levied firms for the nine-month levy year in 2018/19 (from July 2018 to March 2019).
In today’s announcement, however, FSCS noted that it had also recovered billions of pounds following the resolutions of the 2008 banking failures, where FSCS needed to take out loans totalling approximately £20 billion from the Government at the time of the financial crisis. Those loans have now been repaid in full, largely through FSCS’s recoveries work.
In order to reduce the costs of compensation for its levy payers, FSCS seeks to recover amounts paid in compensation from any party that it considers has a legal responsibility. As part of the process of paying compensation, the legal rights of customers are transferred to FSCS. FSCS then “stands in the shoes” of these customers in pursuing any recovery action.
A recovery action is a legal claim which FSCS pursues in order to recover the compensation it has paid to customers, whether through a formal insolvency process, through litigation or some form of dispute resolution.
James Darbyshire, FSCS’s General Counsel, who leads on FSCS’s recoveries work, explained: “The usual avenues of recovery we pursue include actions against the firms we’ve declared in default, and their Professional Indemnity insurers. Increasingly, however, we are taking ever more complex recoveries action, and in those instances we tend to make use of our panel of law firms, who have both the expertise and jurisdictional reach to assist us.
FSCS has been involved in a number of high-profile, high-value and complex recovery cases recently. A notable example is the PPI litigation, which comprises court proceedings against a raft of lenders for undisclosed and excessive commissions as part of PPI arrangements, resulting in recoveries of just under £20 million.
The list of firms that FSCS has declared as failed can be found here.