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FCA sets its first budget at £432m: Advisers to pay 30% of costs

Martin Wheatley 480
FCA chief executive designate Martin Wheatley

The Financial Conduct Authority has set its annual budget for 2013/14 at £432.1m, a 23 per cent reduction from £559.8m in 2012/13.

The FCA’s business plan, published today, shows the budget has been pushed down by an FSA underspend in 2012/13 of £19.5m. Of this, £15m had been allocated to fund emergency regulatory projects but was not needed.

Out of the total £432.1m budget, the industry will pay £391.5m, following £40.6m in retained FSA fines to reduce the amount paid by the industry in fees.The plan suggests that around 30 per cent will be paid for by intermediaries.

Last year chancellor George Osborne ordered all FSA fines to be directed to the public purse rather than industry fees.

The budget is made up of £445.7m to fund the FCA’s operating costs, £2.6m for regulatory reform, and £3.3m in costs associated with changes to the regulator’s remit.

A further £12.6m estimated cost of taking on responsibilities for supervising consumer credit has been ringfenced from next year’s budget. These costs will be recovered from consumer credit firms once the FCA sets up its consumer credit regime.

Around 30 per cent of the FCA cost burden will fall on investment advisers, mortgage advisers and general insurance intermediaries.

A further 28.5 per cent will fall on banks, building societies and lenders, 13.6 per cent will fall on insurers, and 12.5 per cent on fund managers and scheme operators. Firms that do not fall into these categories will bear 15.1 per cent of the costs.

The FCA will employ a total of 2,848 full-time equivalent staff in 2013/14 at a cost of £261.3m. It plans to spend £19.8m on enforcement costs and £18m in professional fees, including the cost of specialist advice, external support, and its customer contact centre.

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Comments

There are 12 comments at the moment, we would love to hear your opinion too.

  1. It’s a good start but they are still sucking an extraordinary amount of money from our industry which is ultimately paid by clients.

  2. Wow, the FSA must be the only financial services organisation/firm to have an underspend.

  3. I note that the IT expenditure is 24% higher than the already scary £61.5m used by the FSA. Also the expected cost of ‘professional fees’ has risen by 5.9%.

    With a proven adviser reduction of 13% (not inclusing those who left at the end of 2012) the financial impact will; weight heavily on those of us who remain.

  4. Headbelowthe parapet 25th March 2013 at 10:05 am

    And the budget for the PRA is how much? If it turns out to be more than 20% of the old FSA budget then this is smoke and mirrors don’t you think…

  5. Headbelowthe parapet 25th March 2013 at 10:05 am

    And the budget for the PRA is how much? If it turns out to be more than 25% of the old FSA budget then this is smoke and mirrors don’t you think…

  6. “2,848 full-time equivalent staff in 2013/14 at a cost of £261.3m”

    If you deduct 13.8% for employers NI, then the average salary at the FCA is more than £80k. Does that not seem a bit high?

  7. I do not have time to check the latest statistics, but I can comfortably state that this amount would exceed the national budget of scores of third world countries.

    It may represent a massive leap in concepts but, since many of these countries suffer from starvation and preventable disease, there is a bit of a moral question as to where priorities should lie.

    I wonder if the new FCA HQ has a nice gym etc like the FSA HQ.

  8. Re Graham R, you are right. The number may or may not include fixed costs but seems correct, back of a fag packet forecast our regulators are good at by cause they can always get more cash if needed and have no commercial reality.

  9. Becoming a headcase IFA 25th March 2013 at 11:07 am

    Around 30 per cent of the FCA cost burden will fall on investment advisers, mortgage advisers and general insurance intermediaries and only 28.5 per cent on banks building societies etc with 13.6 per cent on insurers

    Does that seem fair?

  10. 30% IFA costs seem disproportionate vs risk ( which is what the FSA seeks to reduce) look at the liabilities/misselling costs/ complaints against IFA’s, the IFA proportionate costs should be about 1%!!!!!!!!

  11. Re Headcase IFA. It is not fair, IFAs costs should be about 2% in relation to the risk/complaints/regulation breaches compared to the remainder. Still the numbers now prove what we previously assumed.
    mortgage ARs numbers have reduced by over 75% in the past 5 years, down from approx 32000 to less than 8000. Bigger drop in numbers than IFA’s and still sky high regulation costs unrelated to the decreasing adviser numbers. GI numbers are also down due to on-Line DIY.

  12. Surely the loss of fines to offset fees should result in a change so that firms also pay the cost of the investigation and subsequent enforcement action to the FSA as well as a fine for bad behaviour which can go to the good causes. That would at least mean everyone is paying for the cost of the bad boys being brought to book which is an extra cost over and above normal supervision for compliant behaviour.

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