The FSA says its new intrusive regulation of banks will lead to a hike in its budget and an increase in fees for high impact firms.
The review warns the FSA will be engaging in “far more intense” contact with bank management and auditors to properly review banks’ published accounts and accounting judgements.
It says the analysis of balance sheets that it conducted to inform decisions on bank recapitalisations and the asset protection scheme revealed significant differences in the marks used by different banks to value similar trading book assets and significant differences in the allocation of assets between trading and banking books.
It says: “The FSA has not in the past monitored these accounting policies as closely as now seems appropriate.”
The FSA will be increasing supervisory resources and frequency of Arrow visits from a maximum of every three years to every two years.