The regulator stated it would offer ‘considerably’ increased funding for claims of up to £4.03 billion per year and be ‘more robust and sustainable than the present arrangements’.
The system will also aim to promote increased consumer protection and help maintain market stability through financial stability, while apportioning the cost of compensation between regulated firms ‘as fairly as possible’.
Graeme Ashley-Fenn, FSA director, said: “The new model is more rational, fairer to the various players in the market and provides greater levels of funding. It will be capable of meeting current issues, such as endowment mis-selling, and will now also provide compensation for any future potential, and unexpected, claims.
“Recent experience shows how much improvements are needed. More changes may be made arising from HM government initiatives and others – these do not remove the need to improve the scheme now, but will supplement the improvements being made.”
Mark Chilton, chief executive of Homeowners Mortgages, said: “The restructure has been under consideration for some time. It’s been accelerated by Northern Rock and because of political sentiment. We have to see the details, but if it’s more robust, it’s going to cost more. But financial confidence has taken a battering and it’s got to be restored. Overall, it’s got to be a good thing.”
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