BoE's Bailey: Banks Should Fund Compensation Scheme

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UK banks should contribute towards the Financial Services Compensation Scheme over the coming years so as to minimize the reliance of the industry on public money, a senior Bank of England official Andrew Bailey said Thursday.

"One thing that can be done over the coming years, but gradually, is to pre-fund the FSCS with industry contributions," Bailey, central bank's executive director for banking services said. This would help in reducing the need for the FSCS to borrow from government and would "provide a larger bulwark before the use of public money has to be contemplated," he said in a speech in London.

As the FSCS is an insurance scheme, there is clearly a case for calculating the premium on a basis that reflects risk. However, a lot more thinking is required before doing this in an appropriate way, said Bailey.

Bailey also said the British banks should follow the U.S. rule that requires deposit takers to provide detailed information on their derivatives positions. "The general principle is that resolution is a very information hungry activity."

UK banks should contribute towards the Financial Services Compensation Scheme over the coming years so as to minimize the reliance of the industry on public money, a senior Bank of England official Andrew Bailey said Thursday. (Market News Provided by RTTNews)