"As we set out in previous correspondence, no basis of levy allocation is perfect and in reviewing the current model we will be seeking to balance a number of factors."
In a letter to Andrew Tyrie, Chairman of the Treasury Committee, Bailey said that final rules will be made by the summer of 2017, with the new arrangements taking effect from the 2018-19 levy year.
He said that the main focus was "improving affordability for firms without reducing consumer protections".
Bailey said the FCA was in particular considering smoothing firms' levy contributions by, for example, merging certain funding classes or through more extensive use of the FSCS credit facility. It is also considering the role and responsibilities of product providers for the way that their products are distributed.
The FCA will also consider changes to the scope of the FSCS, including the introduction of protection for some consumer credit activities, as well as changes to FSCS compensation limits. This, Bailey said, could involve increasing limits on compensation in certain areas in order to better protect consumers that manage their pension accumulation or, in particular, decumulation outside of traditional life insurance products.
The FCA is also considering introducing risk-based levies related to the products or services a firm offers, its capital reserves or complaints reported. Bailey says he is "aware that some sectors of the industry are keen to fund the FSCS through a product levy, and we will be considering this proposal in our consultation".
Bailey concluded: "I hope this conveys the sense that we are keen to consider a broad range of possible approaches. As we set out in previous correspondence, no basis of levy allocation is perfect and in reviewing the current model we will be seeking to balance a number of factors."
Commenting on the correspondence, Andrew Tyrie said: “There has been talk of reviewing the FSCS levy since 2001, so this is not before time.
“I’m glad that the funding review is well underway, and that the scope of the review includes issues raised by the Committee, such as the unpredictable nature of the levy. It is likely that this will be raised when the Committee sees him next month."
