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update on review of funding arrangements for the ombudsman service

19 October 2006

We - the Financial Services Authority (FSA) and the Financial Ombudsman Service - are grateful for the responses we received to our discussion paper on the funding of the ombudsman service's compulsory jurisdiction. This discussion paper canvassed a wide range of possibilities, and the responses have helpfully narrowed the issues raised.

A significant majority of respondents, including most trade bodies, favoured a move towards the "new model" options E to H. However, further work is required to analyse how this model would operate in various possible scenarios, before the FSA can be satisfied that it should be adopted.

To allow sufficient time for this modelling to be completed – and taking into account associated system changes, and the need to give firms ample advance notice – it will not be possible to introduce fundamental changes before April 2007.

The ombudsman service will consult on its budget for 2007/8 in the usual way in January 2007. Separately, the ombudsman service and the FSA aim to produce a consultation paper on funding issues, with longer-term conclusions, in the early part of 2007.

We plan to implement any new arrangements in April 2008. The FSA, the ombudsman service and the Financial Services Compensation Scheme (FSCS) are working together to ensure that firms have as much notice as possible of the impact that any changes arising from the funding reviews may have.

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