The FCA has announced that it expects to incur £30m in costs over Brexit.
The regulator’s business plan this morning shows that the bill, which is equivalent to just under 6 per cent of its total operating budget, will be funded in a variety of ways, including through reserves, reprioritisation of work and extra levies to cover new responsibilities.
In a press conference this morning, FCA chief executive Andrew Bailey said: “We take the view we can’t just add Brexit onto everything else we do. It is not feasible for us and not feasible for industry.”
While Bailey said that at a base level, “like for like budget has not increase by more than inflation”, £14m of the £30m bill will be funded by pushing back pieces of current FCA work.
Bailey noted that the role of the general counsel when the Senior Managers Regime comes into force was one of these, as was working on a digital archive of public company filings.
“We did a very rigorous prioritisation,” Bailey said: “[The digital archive] is good thing to do no doubt but we are not going to do it in the next year.”
£5m of the bill is being funded from the regulator’s reserves. Another £5m will come in the form of additional fees, “with a focus on the firms that
are most likely to be affected by EU withdrawal.”
The remaining £6m will be recovered from specific firms that fall under new responsibilities the FCA will take on, including around passporting and on-shoring credit rating agencies and trade repositories post-Brexit.
Bailey told the FCA’s press conference this morning: “Uncertainty around Brexit is a challenge, no doubt about it…. More than ever we are going to have to keep the plan under close watch.”
One thing the FCA said that it would not sacrifice to make room for the budget was advice firm supervision. Phoenixing, the practice where rogue advisers cease trading and then get authorised at a new firm in order to avoid responsibility, was being looked at by the FCA, Bailey noted.
He said: “]We are doing this] not because there are no rules of engagement. There certainly are. But we are aware the issue has arisen. We are actively working on what could be done, either within the existing rules or under new ones.”