The FCA will not be looking at a so-called product levy in order to improve how the Financial Services Compensation Scheme is funded, its chief executive has said.

Adviser campaign groups have stepped up their calls in recent weeks to find a new way of funding the lifeboat scheme. Instead of collecting fees from regulated firms, under a product levy, a small additional charge would be added to the cost of individual products – potentially varying in size by the risk attached – to underwrite the cost of future claims.

The model has the support of professional bodies such as the Personal Finance Society.

In its last review of the FSCS, the FCA had ruled out introducing such a funding model.

Given increasing pressure on the scheme however, Mortgage Strategy’s sister publication Money Marketing asked acting FCA boss Chris Woolard at a press conference following the regulator’s annual public meeting today whether or not a product levy would be put back on the table as a potential solution to spiralling bills.

“The answer is no,” Woolard replied.

Instead of focussing on how exactly the bill is apportioned, Woolard said the regulator’s attention will be on how to limit how much needs to be paid in compensation in the first place.

“We’ve been through a review of the FSCS relatively recently, and one of the difficulties is it reduces to a zero sum game, with different sectors really arguing over who is picking up the bill,” he said. “The big question how do we try and make the size of the pot as small as we possibly can? How do we supervise, how do we regulate? How do we deal with repeat offenders, phoenix firms?

“The size and scale of the overall cost of the compensation bill is not one that I want would want to see long term. How you divide the cake misses the point; its about how we attack the underlying harm in the first place.”

While Woolard accepted that the FSCS is a relatively generous scheme by international standards, he noted that consumers would want to see a certain level of protection to foster engagement and trust in financial services.