CP1/26 – Financial Services Compensation Scheme – Management Expenses Levy Limit (MELL) 2026/27
AI Analysis
The PRA and FCA have jointly issued consultation paper CP1/26 proposing to set the **Management Expenses Levy Limit (MELL) for the Financial Services Compensation Scheme (FSCS) at £113 million for 2026/27**, comprising a £108 million management expenses budget and a £5 million unlevied reserve. This consultation determines the maximum amount the FSCS can levy on authorised financial services firms to fund its statutory compensation scheme operations, directly affecting compliance costs for all regulated entities.
Key dates
- 10 February 2026 Deadline
- – Consultation deadline for comments on CP1/26
- 1 April 2026
- – Effective date: proposed MELL applies from start of FSCS financial year
- 31 March 2027
- – End date of 2026/27 MELL period
Suggested considerations
- *Review the consultation paper (CP1/26) in detail, particularly Appendices 3 and 4 detailing budget line items and PRA/FCA funding class allocations
- *Assess levy impact on your firm's 2026/27 budget based on your regulated business volume and funding class allocation
- *Prepare internal stakeholder communication regarding the £4.4 million aggregate increase and its implications for your firm's regulatory costs
- *Monitor the FSCS January 2026 budget update for detailed cost breakdowns and compensation levy forecasts
- *Submit consultation responses if your firm wishes to comment on the proposal by 10 February 2026
- *Plan for implementation of any final MELL determination effective 1 April 2026
What changed
- The proposed MELL for 2026/27 introduces the following material changes:
- Budget increase of £4.4 million from 2025/26 (from approximately £103.6 million to £108 million), broadly aligned with inflation
- Nominal reduction of £6.6 million on a like-for-like basis when excluding the cost of enhancements to the FSCS's revolving credit facility (RCF)
- Real terms reduction of £11 million when accounting for inflation adjustments
- RCF enhancement to £3 billion to support the Bank of England's recapitalisation powers and enable faster depositor payouts
- Unlevied reserve maintained at £5 million to provide flexibility for unforeseen costs The MELL covers ongoing operating costs including IT, staff, legal services, and claims handling expenses, but excludes compensation payouts which are levied separ
Compliance impact
Urgency: HIGH
Who is affected
Related regulations
References
AI-generated analysis. May contain errors or omissions — verify with the original PRA source before acting. Full disclaimer.
What the PRA said
Consultation paper 1/26
Published by PRA . Read the full notice at the source for the authoritative text.