UK bank compensation scheme faces leadership vacuum after recruitment delays
The institution that protects government-guaranteed deposits in failed banks is facing questions over its future leadership after multiple setbacks to recruiting a new chair and permanent chief executive, Morning Wire can reveal.
Veteran banker Marshall Bailey was due to step down in April after serving two three-year terms as chair of the Financial Services Compensation Scheme (FSCS), but regulators extended his term until the end of September after recruitment for his replacement stalled.
Two people familiar with the matter said Lesley Cowley, who formerly chaired the Driver and Vehicle Licensing Agency (DVLA) for almost a decade, was poised to be announced as Bailey’s successor in February before the Financial Conduct Authority (FCA) chose not to approve the appointment.
It is unclear why the FCA made this decision.
Seven months later and with less than two weeks before Bailey’s term ends, the FSCS is still “searching for the right candidate”, another person with knowledge of the process said.
FSCS appointments are approved by the FCA and Bank of England’s Prudential Regulation Authority (PRA), with the chair and chief executive also requiring Treasury backing.
The FSCS, FCA, PRA and Treasury declined to comment on candidate preferences. “We expect to announce a new chair shortly, before this term ends,” an FSCS spokesperson said. Cowley also declined to comment.
Disagreements between regulators and the government over FSCS appointments are not unprecedented. Last October, the scheme named Martyn Beauchamp as its interim chief executive after reports of conflict between the FCA, PRA and Treasury over the choice.
Beauchamp was appointed after Caroline Rainbird abruptly resigned last June.
The delay in finding a new chair has impacted the search for a permanent CEO, with one person familiar with the hiring process suggesting that finding a new CEO would be one of the chair’s main responsibilities.
When it announced Beauchamp’s appointment, the FSCS said recruitment for the permanent CEO would begin in line with the start of its next chair’s first term, which was expected to be April.
A source close to the search said applications for the permanent CEO role closed last week and the new chair was now expected to be involved later on in the process. They added that the FSCS had no expected date for when it would announce a new CEO given the “early” stage of recruitment.
It is understood that Beauchamp signed on for a 12-month fixed term as interim boss, putting pressure on the FSCS to name a permanent chief before the end of October.
“It does leave the organisation in limbo at a key time, which was not the original plan or intention,” said one of the people familiar with the matter.
After plans to appoint Cowley fell through, the FSCS launched a new recruitment effort for the chair post with headhunters Saxton Bampfylde.
The firm began soliciting applications on its website in April and had planned to draw up a shortlist by June, according to an online job description. Saxton Bampfylde did not respond to a request for comment.
The FSCS’ last permanent CEO was paid £351,394 for the 2022/23 financial year, while its chair currently earns £75,000 per year. Saxton Bampfylde’s brief said being chair required around two days a week of commitment.
The scheme was set up by the government in 2001 to protect customers of failed banks, insurers and other financial services firms. In the 2023/24 financial year, it paid out £423m in compensation to 19,008 customers of failed businesses.
It is funded by a levy on regulated financial firms, with compensation payouts for bank failures capped at £85,000 per depositor.
Doubts over the FSCS’ future leadership come at an important time for its role in the banking sector. It emerged last spring that the Bank of England was considering a major overhaul of the scheme after the collapse of Silicon Valley Bank and subsequent rush to stabilise its UK subsidiary.
The Treasury announced in January that the PRA would regularly review the deposit guarantee limit, which has existed since 2010. While the European Union’s cap is similar at €100,000 (£84,000), the US has a $250,000 (£189,000) limit.
In August, the Bank of England told some of the UK’s biggest lenders that they needed to improve their plans for a potential failure.
It found areas for “further enhancement” in the preparations of Barclays, HSBC, Lloyds and Virgin Money, while it also named Standard Chartered as the only bank to have “shortcomings” – although none serious enough to hamper its potential resolution.
Among her roster of leadership posts, Cowley chaired Companies House from 2017 to 2023, and has served as chair of Airport Coordination Limited since 2020. The latter manages slots at more than 75 airports worldwide.
At the start of September, Bailey as chair of the US-based CFA Institute, a non-profit association of investment professionals.