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Banks and insurers hit by £11m Section 166 costs

The Prudential Regulation Authority has called in external experts to review the activities of regulated firms 33 times in the past 11 months at a cost of £11.4m.

Section 166 of the Financial Services and Markets Act allows regulators to obtain an expert’s view of aspects of a firm’s activities that are of concern or need detailed analysis. The cost is borne by the firm.

The PRA’s annual report, published today, says in the 11 months from April 2013, eight S166 reports relating to the prudential regulation of insurance companies were commissioned in 2013/14.

There were further seven relating to the prudential regulation of deposit takers and clearing houses, two looking at IT and infrastructure issues within a firm, and 16 on governance and risk management.

The cost of the reports in the first 11 months of the PRA’s operation ranges from £14,602 to £1.3m.

The report also reveals the measures the regulator is taking to attract and retain staff. The FSA regularly reported high staff turnover. In the past 11 months, turnover rate at the PRA has been 11.6 per cent, far higher than the 6.7 per cent turnover rate for the rest of the Bank.

In March, the National Audit Office warned the high staff turnover at the PRA and the Financial Conduct Authority is undermining confidence. The regulator is now reviewing its performance in hiring replacements for those leaving and a number of measures have been introduced to retain staff.

The PRA says: “Ensuring the PRA can retain and develop talented individuals is essential to achieving its objectives. Emphasis has been placed on talent management, including the delivery of a career development week, talent planning for senior roles, and greater emphasis on diversity and inclusion initiatives in recruitment and career advancement.”

The PRA is responsible for the prudential regulation of insurers as well as banks. Looking ahead to next year the regulator says it is looking at how it could adapt its supervisory approach to insurers to focus on certain types of policies or policy holders.

It says: “This could be because certain types of insurance or policyholders require a higher degree of protection. It will also take into account the impact of the cover being withdrawn and the ability of and cost to the policyholder to transfer to another provider.

“Such a framework would suggest greater focus on compulsory insurance, any disruption to which would have an impact on the real economy, and long-term life insurance products which are difficult to transfer. The PRA will also consider the extent to which the level of protection provided by Financial Services Compensation Scheme coverage should affect the supervisory approach.” 

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. “The cost is borne by the firm.” And passed on to the consumer.

    Regulators, of course don’t like to think about the realities of who bears the costs and like all civil servants they just think the magic money tree will pay. If they call for a S166 unnecesarily, they are causing consumer detriment.

  2. Bryan – And letting firms away with poor pratices, products and services has no impact on the consumer?

  3. brian weatherley 18th June 2014 at 11:19 am

    Of the 33 instances, how many resulted in exposing malpractice ?

  4. I suppose we’ll have to wait and see the outcomes of these reports, but this week we have YBS and credit Suisse, last week we had Santander – Thousands of consumers affected by these two cases alone.

    Your anti-regulator stance can’t apparently blinds you from all the positive work that is goes on.

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