FSA budget rises 18.3%, Sants warns better regulation costs more
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The FSA’s budget for 2010/11 has risen 18.3 per cent to £491m, up from £415m last year, amid warnings from chief executive Hector Sants that a more intrusive regulator is going to cost more.
The FSA Business Plan 2010/11, published today, shows staff costs have jumped 16 per cent from £299m to £347m this year, with the regulator planning to take on an addition 460 staff to fulfill its enhanced supervisory work and implement Solvency II. This will bring staffing levels to 3,700.
The FSA says there are no funds allocated for general pay increases and the majority of staff will not receive a pay rise in 2010/11. However the board has agreed to allocate a budget equal to 1.5 per cent of the total salary bill to “address significant pay anomalies”.
The annual funding requirement has risen to £455m, up 10 per cent from £414m last year.
But the FSA says it anticipates an £11m surplus from 2009/10, which it will use to reduce the funding requirement this year.
The regulator has increased the budget for its business unit dealing with risk by 42.5 per cent, up from £98m last year to £140m in 2010/11.
The Business Plan sets out the FSA’s main focus for the coming year, which includes effective supervision backed by credible deterrence in enforcement and embedding organisational and cultural change needed to implement intensive supervision.
It will also continue the policy reform programme driven by the Turner Review and the wider policy agenda mandated by the European Union and promote financial stability should the Financial Services Bill be enacted.
Sants says: “Intensive supervision is inherently more confrontational. Our supervisors are making judgments both about the robustness of the business models of firms and the suitability of the products they are selling. We will then intervene promptly if we anticipate problems.
“This proactive approach to supervision requires significantly more people than the old reactive model and those individuals must be of a higher quality and supported by more sophisticated systems. If society wants a more proactive approach it must accept that it will have a larger and more expensive regulator.”
Pinsent Masons partner in the financial services team Tim Dolan, who was formerly with the FSA’s enforcement division, says: “The FSA’s change in approach has direct implications for all firms which are authorised by the FSA. They have to be prepared for the FSA to be more difficult and more demanding.
“Firms will need to ensure that both their compliance teams and their senior management are capable of dealing with a more demanding regulator. Firms will also have to allow more time for transactions which require FSA approval.”
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Readers' comments (31)
Anonymous | 17 Mar 2010 12:51 pm
I await with excited anticipation the response by 'Incompetent Regulators Awards Team'....
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Kelman Chambers | 17 Mar 2010 1:37 pm
Sants warns better regulation costs more.
If this is the case, will all the previous contributors the the FSA get rebates for the last few years?
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michael brayne | 17 Mar 2010 1:40 pm
But does this amount include their bonus?
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Anonymous | 17 Mar 2010 1:42 pm
Jobs for the boys? Overly paid? If the regulator was to effectively regulate the products, they would need less staff to regulate the advisers. It's only when products fail that clients feel they have been miss-sold, so if dangerous products were unborn, then complaints would fall, and then there would be a 'skill' based adviser where some would be better than others in 'portfolio management' but without the worry that a product was inherently poor and no need for a complaint based regulator. However .... The FSA needs to be needed so that they can continue in their highly paid jobs!
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Simon Webster | 17 Mar 2010 1:49 pm
The FSA and most of its predessors are and always have been, institutionally incompetent...
Pension transfers, AVCs, precipice bonds, Endowments, split trusts, Equitable, arguably Lehmans.
They measure their success by the firms they have destroyed: Berkeley, A2O & Park Row come all too readily to mind.
They have destroyed much but what have they achieved? Their only claim to fame is the whole, highly paid industry they have spawned.
And now they want more money and to create more jobs when the whole country is on its knees - in part at least as a result of its latest failures.
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Peter Herd | 17 Mar 2010 1:53 pm
I think that we will all agree that we need better regulation as I for one do not want to go through the last two years again.
Or are you all saying that you are happy to pay higher taxes to pay for the bail outs.
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Mr Smug | 17 Mar 2010 1:57 pm
How would the FSA know what good regulation looks like? They have failed in everything they are supposed to do.
Regulation should be targeted at the companies that pose the highest risk, it should be efficient, it should not impose massive costs on business. We know it is none of these things.
You can easily treble that £374m cost. That's just the FSA - a whole industry now survives on the back of box ticking and backside covering.
Who ultimately pays? The consumer.
Do they get any benefit? I suggest you ask Keydata's investors what they think, or Arch Cru's or any of the other failures under the FSA's watch.
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David Reilly | 17 Mar 2010 1:58 pm
Calm down everyone - get on with your work...
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Rob | 17 Mar 2010 1:59 pm
To be fair to the FSA, The 18.3% increase is just in line with inflation..... The inflation we will have in the next year due to their "regulation" of the banks...
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Never Too Old To Rock | 17 Mar 2010 2:03 pm
Money For Nothing----Dire Straits.
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