The PRA expects the FSCS to exercise the functions that are conferred on the scheme manager by Part XV of the Financial Services and Markets Act 2000 (FSMA) as amended by the Financial Services (Banking Reform) Act 2013.


The PRA is required under section 213 of FSMA to make rules establishing a compensation scheme (the compensation scheme). The PRA expects that the FSCS will only pay claims if a firm is unable or likely to be unable to meet claims against it because of its financial circumstances. If a firm is still trading and has sufficient financial resources to satisfy a claim, the firm will be expected to meet the claim itself.


FSMA confers certain powers upon the FSCS, such as the power under section 219 of FSMA (Scheme Manager’s powers to require information) to require persons to provide information.


In addition to rules made by the PRA, other aspects of the operation of the FSCS are dealt with through powers under company law (such as the power to borrow, to take on premises etc) and through rules made by the Financial Conduct Authority (FCA).