CFDG recommends systematic protection for charity investments

7th April 2009

The Charity Finance Directors' Group (CFDG) have asked the Government to create a separate depositor class for charities, regardless of size or governance structure. This is CFDG’s recommendation in their submission to HM Treasury’s consultation on the Financial Services Compensation Scheme (FSCS). Currently the FSCS does not recognise any difference between charities and other organisations and individuals, and this has meant that only some charities who are looking at losses in the Icelandic banks are covered.

A separate depositor class would recognise the following facts:

- Charities exist to help the most vulnerable people and places;

- The inflexibility of the funding environment means that charities often have to rely on their reserves to maintain service levels;

- Unlike the public and private sectors, the nature of charitable work and its rewards mean that they cannot always recruit investment expertise into their staff.

Kate Hand, Policy and Campaigns Officer at CFDG says, “It is vital that the public money invested in charities is protected for the public benefit. The Treasury Select Committee’s recent report has found that all charities’ deposits in the Icelandic banks should be covered. In planning for the future, we believe the introduction of a depositor class for charities would substantially contribute to charities’ long-term stability, and ultimately the well-being of all those they work to support.”

CFDG also identified the complexity of the current FSCS regulations as a serious barrier to charities’ ability to claim through the scheme. The FSCS should revamp their regulations to allow all depositors to see whether they are covered as quickly as possible. This would allow charities to act faster, either to recover their deposits by submitting a claim or to start planning for a loss. In either case the faster charities can act the less vulnerable they and their beneficiaries will be.

Finally, CFDG have recommended that the Government also introduce a loan scheme for charities, since recoveries from the Icelandic banks will take a long time to be returned and charities’ services will suffer as a result. A loan scheme could cover the amount the administrator expects to return, which would be repayable out of the recoveries and would therefore not be a form of grant aid. We feel that this would be particularly appropriate since the Government has taken a similar approach to helping local authorities.

You can find CFDG’s response to the FSCS consultation here

– Ends –

 

Notes to Editor:

For further information please contact our Policy Team.

The Charity Finance Directors' Group was set up in 1987 and is an umbrella group that specialises in helping charities to manage their finance-related functions. CFDG’s circa 1,600 plus members are responsible for the finances of charities with a wide variety of income levels. Between them our members manage some £14.7 billion in charity income per year.

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