Question to the HM Treasury:

To ask the Chancellor of the Exchequer, if he will make a statement on plans to update the Financial Services Compensation Scheme.

Under the Financial Services and Markets Act (FSMA) 2000, the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA) are each responsible for making rules in relation to the Financial Services Compensation Scheme (FSCS). The PRA is responsible for rules relating to claims in connection with deposits and insurance provision. The FCA is responsible for claims in connection with all other relevant types of financial services activities that are protected by the FSCS.

As part of its responsibilities, the PRA is responsible for setting the depositor coverage limit, which is currently set at £85,000. The PRA has a statutory duty to review this limit regularly, with the next review due by 2025 at the latest. Any change to the limit must be approved by HM Treasury and would therefore be carefully considered by the government.

The FCA is currently reviewing the FSCS compensation framework for areas it is responsible for. In its Feedback Statement published in December 2022, it committed to a number of actions including plans to assess the scope of FSCS coverage, review the current compensation limits and review the current funding class thresholds.

Under the Financial Services and Markets Act 2000, the PRA and FCA are also required to conduct a cost-benefit analysis to ensure the compensation schemes managed by FSCS continue to reflect the total value of the claims made or likely to be made.Both the PRA and FCA would use such assessments in forming its overall judgement on forming rules in relation to the FSCS.