AMI: FSCS funding arrangement for Bradford & Bingley

Chris Cummings, Director General of the AMI, said: "The nationalisation of Bradford & Bingley has clear immediate benefits to consumers, reassuring them that their savings will not be lost. However, the process and involvement of the Financial Services Compensation Scheme (FSCS) is significant, moving the Scheme into new territory. The enormity of the loan from the Bank of England and subsequently HM Treasury to the FSCS raises some serious questions for the industry - and has potential ramifications for the wider financial services sector, not just banks.

"At current LIBOR rates we estimate that interest due on the loan stands at around £1.8bn per annum. FSCS funding for the broad depositor protection class is around £2bn, before the wider industry - from insurers to IFAs and mortgage brokers - are required to contribute. We need to remember that the ultimate cost will be borne by the market, and so the implicit impact on consumers must be carefully monitored over coming months."