The UK's Financial Conduct Authority (FCA) has previously sought views on the protection framework offered because of concerns about the increased costs of the Financial Services Compensation Scheme (FSCS).

The FSCS provides compensation when financial services companies are unable to meet customer claims needs, providing important consumer protection and ensuring consumer confidence in financial services.

The increasing compensation costs borne by the FSCS could create a disincentive for firms entering the market or wishing to remain in it, which in turn could affect some financial services. The FCA's review aims to ensure that the compensation framework provides appropriate consumer protection and distributes costs fairly and sustainably.

For the next phase of the review, the FCA is planning to:

Review the limit of compensation and consider whether it is maintained at an appropriate level

Review the funding category threshold to consider whether it is maintained at an appropriate level

Conduct research with the FSCS to improve the impact of FSCS protection on consumer decision making, confidence and behaviour

Sheldon Mills, executive director of Consumer and competition at the FCA, said: "We welcome constructive engagement and feedback which will provide valuable information for the next phase of work. We want to ensure that consumer protection is provided in a fair and sustainable way through the FSCS. We will continue to take action to prevent harm."

As part of its Consumer Investment strategy, the FCA is already taking action to get to the root causes of high liability and crack down on problem firms. Actions include:

Strict controls to prevent potentially harmful companies from entering the market

Impose twice as many restrictions on companies, preventing them from promoting or selling certain products and services

Use emergency powers to prevent asset disposals by financial advisory firms that advise BSPS members