The parliamentary commission on banking standards says the Financial Conduct Authority must cut costs and become “smaller and more focused”.
In its final report, published this week, the commission says rising costs as a result of the changeover from the FSA to the FCA and Prudential Regulation Authority should only be transitional.
The FCA and PRA have a combined total budget for 2013/14 of £646.3m, with £432m allocated to the FCA. The total budget represents a 15 per cent increase on the FSA’s budget of £559.8m for 2012/13.
In March, FCA chief executive Martin Wheatley said the expanding remit of the regulator into consumer credit regulation next year will lead to rising regulatory fees.
The commission states: “A strategic aim of the FCA should be to become a smaller, more focused organisation.
“The commission recommends the FCA replicate the Bank of England’s stated intention for the PRA to operate at a lower cost than its equivalent part of the FSA, excluding what is required to fund new responsibilities. The FCA should set appropriate timescales for implementation of this recommendation.”
The commission questions how effective the FCA will be at transitioning to a new regulator because it is based in the same building with many of the same staff.
It also recommends the Treasury select committee undertakes a review of the new regulatory structure in April 2016.
The paper rejects FCA calls for the power to suspend individuals under investigation, but accepts its request to extend the three year time limit for enforcement in some cases.
Highclere Financial Services partner Alan Lakey says: “There are arguments the FCA is empire building so it would be good to cut the number of employees down to a manageable level and get them out of expensive offices.”
Read our full coverage of the Banking Commission’s final recommendations: