'A letter on behalf of the FSA and the FSCS to the British Bankers' Association, Building Societies

Financial Services Authority Dr. Thomas Huertas Director, Banking Sector Direct line: 020 7066 2300 Local fax: 020 7066 2301 thomas.huertas@fsa.gov.uk 31 December 2008 Dear FSCS levies for deposit-taker defaults: implications for firms 1. On behalf of FSA and FSCS, I am writing to set out, for you and your members, a number of points relating to recent deposit-taker defaults, and the involvement of the Financial Services Compensation Scheme (FSCS) in resolving effectively these problems. 2. We, and the FSCS, have received a large number of queries from firms on the involvement of the FSCS in recent cases such as Bradford & Bingley plc (B&B), Heritable Bank plc (Heritable), Kaupthing Singer & Friedlander Limited (KS&F), Landsbanki "Icesave" (Icesave) and London Scottish Bank plc (London Scottish). Firms have understandably been concerned about the likely impact on them, now and in future, arising from their responsibility for future FSCS levies. The role of the FSCS 3. The role of the FSCS is, in general, to provide compensation to consumers of financial products when authorised firms are not able to meet their obligations. The existence of this compensation safety net protects consumers, leading to greater confidence in their dealings with financial firms, which is a benefit for all of those firms. Deposit takers have, of course, benefited from the existence of FSCS coverage without having to pay substantial levies in recent ...