Speaking today at the FSA’s annual conference in London, chief executive Hector Sants told delegates he regretted the FSA’s “unacceptable” failure to properly regulate Northern Rock prior to the Summer of 2007.
He said the FSA has now put measures in place try and ensure such mistakes are not repeated, but warned these would come at a cost.
He said: “The programme includes a commitment to have a minimum supervisory resource for all high impact firms. This will ensure the necessary focus and continuity with these key initiatives.
“It will lead to increased costs and that we are thus likely to exceed the levels of expenditure shown in the Business Plan for 2008/09 which will also have consequences for next year. I do, however, believe that this necessary investment is supported by the firms who will benefit from the resultant higher quality supervision.”
Sants added that firms are “likely to see a significant increase in fees in 2009/10” but says the regulator will try to absorb as much of the increase as possible.
Sants said the Northern Rock debacle had overshadowed a number of achievements the FSA had made in the past year in the implementation of Mifid and working towards Solvency II.
He said after the challenges of the liquidity crisis last summer and capital crisis in the Autumn, the FSA must now face the challenges associated with a downturn in the real economy.
He said after this the final act to deal with will be the “new normal” where firms will have to adapt business models and consumers their spending patterns.
He said: “I have already previously observed that the era of “easy money” is gone for some and all of us must take that into account, whether we are managers of financial institutions, borrowers or savers.”