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FSA budget rises 18.3%, Sants warns better regulation costs more

The FSA’s budget for 2010/11 has risen 18.3 per cent to £491m, up from £415m last year, amid warnings from chief executive Hector Sants that a more intrusive regulator is going to cost more.

The FSA Business Plan 2010/11, published today, shows staff costs have jumped 16 per cent from £299m to £347m this year, with the regulator planning to take on an addition 460 staff to fulfill its enhanced supervisory work and implement Solvency II. This will bring staffing levels to 3,700.

The FSA says there are no funds allocated for general pay increases and the majority of staff will not receive a pay rise in 2010/11. However the board has agreed to allocate a budget equal to 1.5 per cent of the total salary bill to “address significant pay anomalies”.

The annual funding requirement has risen to £455m, up 10 per cent from £414m last year.

But the FSA says it anticipates an £11m surplus from 2009/10, which it will use to reduce the funding requirement this year.

The regulator has increased the budget for its business unit dealing with risk by 42.5 per cent, up from £98m last year to £140m in 2010/11.

The Business Plan sets out the FSA’s main focus for the coming year, which includes effective supervision backed by credible deterrence in enforcement and embedding organisational and cultural change needed to implement intensive supervision.

It will also continue the policy reform programme driven by the Turner Review and the wider policy agenda mandated by the European Union and promote financial stability should the Financial Services Bill be enacted.

Sants says: “Intensive supervision is inherently more confrontational. Our supervisors are making judgments both about the robustness of the business models of firms and the suitability of the products they are selling. We will then intervene promptly if we anticipate problems.  

“This proactive approach to supervision requires significantly more people than the old reactive model and those individuals must be of a higher quality and supported by more sophisticated systems. If society wants a more proactive approach it must accept that it will have a larger and more expensive regulator.”

Pinsent Masons partner in the financial services team Tim Dolan, who was formerly with the FSA’s enforcement division, says: “The FSA’s change in approach has direct implications for all firms which are authorised by the FSA. They have to be prepared for the FSA to be more difficult and more demanding.  

“Firms will need to ensure that both their compliance teams and their senior management are capable of dealing with a more demanding regulator. Firms will also have to allow more time for transactions which require FSA approval.”

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Comments

There are 31 comments at the moment, we would love to hear your opinion too.

  1. I await with excited anticipation the response by ‘Incompetent Regulators Awards Team’….

  2. Kelman Chambers 17th March 2010 at 1:37 pm

    Sants warns better regulation costs more.

    If this is the case, will all the previous contributors the the FSA get rebates for the last few years?

  3. But does this amount include their bonus?

  4. Jobs for the boys? Overly paid? If the regulator was to effectively regulate the products, they would need less staff to regulate the advisers. It’s only when products fail that clients feel they have been miss-sold, so if dangerous products were unborn, then complaints would fall, and then there would be a ‘skill’ based adviser where some would be better than others in ‘portfolio management’ but without the worry that a product was inherently poor and no need for a complaint based regulator. However …. The FSA needs to be needed so that they can continue in their highly paid jobs!

  5. The FSA and most of its predessors are and always have been, institutionally incompetent…

    Pension transfers, AVCs, precipice bonds, Endowments, split trusts, Equitable, arguably Lehmans.

    They measure their success by the firms they have destroyed: Berkeley, A2O & Park Row come all too readily to mind.

    They have destroyed much but what have they achieved? Their only claim to fame is the whole, highly paid industry they have spawned.

    And now they want more money and to create more jobs when the whole country is on its knees – in part at least as a result of its latest failures.

  6. I think that we will all agree that we need better regulation as I for one do not want to go through the last two years again.

    Or are you all saying that you are happy to pay higher taxes to pay for the bail outs.

  7. How would the FSA know what good regulation looks like? They have failed in everything they are supposed to do.

    Regulation should be targeted at the companies that pose the highest risk, it should be efficient, it should not impose massive costs on business. We know it is none of these things.

    You can easily treble that £374m cost. That’s just the FSA – a whole industry now survives on the back of box ticking and backside covering.

    Who ultimately pays? The consumer.

    Do they get any benefit? I suggest you ask Keydata’s investors what they think, or Arch Cru’s or any of the other failures under the FSA’s watch.

  8. Calm down everyone – get on with your work…

  9. To be fair to the FSA, The 18.3% increase is just in line with inflation….. The inflation we will have in the next year due to their “regulation” of the banks…

  10. Never Too Old To Rock 17th March 2010 at 2:03 pm

    Money For Nothing—-Dire Straits.

  11. Hector

    Better regulation starts with better regulators who are respected by the regulated, when both parties are ‘confrontational’ I would contend that mutual disrespect and anarchy is the end result particularly when the predilections based on the background and mindset of the regulators are influencing their thoughts thoughout the process.

    This morning I saw at first hand how biased a senior regulatory figure can be, he is a ‘banker’ by trade, a former BofE deputy who spent quite some time at the FSA afterwardss, he once admitted that ‘the regulators got it wrong’ and now he is defending his position by resisting any criticism of his banking buddies.

    And this man is advising the Conservatives on the future of regulation! Let’s call it regulation MkIII, or is it IV? I lose track sometimes.

    If I was even remotely religious I would be crying out “God help us all”. But what can God do when we are faced with out and out discrimination? Of course I am assuming that once again all these new people will be joining the hordes who already spend a disproportionate amount of time scrutinising IFAs while the banks sales teams carry on regardless… there might be a film title in there somewhere.

    Society is in dire need of regulatory balance, I see none despite decades of increasing cost and complexity. Do you?

  12. So the cost of the average member of staff is (£347,000,000 divided by 3700) £93,783.78 ?!?!

  13. I’m gonna miss Big Hec once he’s gone – an island of intelligence in a sea of idiots.

  14. Unbelievable. So the regulator feels it will have to be “a larger and more expensive regulator.” Why ? If it had proved it’s value in the past then maybe this phylosophy could be endorsed. I am DA and have recently given them notice of my wish to cease my permissions by 26/03/2010 as I intend to switch to be an AR. My reply from the FSA has been that they have 6 months in which to concider my application to cease my permissions but currently 80% of applications are dealt with within 3 months. Wow isn’t that great. Why is it that I have to adhere to time scales and service standards but the FSA can make up there own time frames and basically deal with me as and when they want. They need to get right what they should be doing and then look at moving into other areas like product developement and giving free advice. The more I read the more they make my blood boil. I just want to make a living but they seam to want to discurage me.

  15. Its a Government agency so you would expect it to be run by incompedent idiots. They answer to know one but themselves. I am sure that their remit is to run all independent people out of the business and leave it to the banks etc,

  16. Good regulations costs more!

    Bad regulation costs more!

    Why does good regulation cost more than bad regulation?

    All regulation should be good regulation.

    Good regulation should “not” cost more especially when only 3% of complaints come from the IFA sector that seems to get 100% of regulation and 100% of costs.

    Maybe IFA’s should get 3% of costs and 3% of regulation and the FSA can go regulate the banks who get 50% of FOS complaints and 100% of the publics of compliants!

  17. Incompetent Regulators Awards Team 17th March 2010 at 2:53 pm

    COMPLETE MADNESS

    As if it doesn’t cost enough already.

    What does this guy think he’s saying. More people with more wasted money and more of everything that won’t work. When will he and the others learn? Lets all become regulators then!

    What we have is the WRONG REGULATIONS and we don’t need anymore of this rubbish. What we need is a KEEP IT SIMPLE STUPID approach. Fewer people from the right area of industry and not more of the same failed ones. More staff with the same cr*p will mean more c*ck ups! The troube in this country is we have the wrong staff making decisions on behalf of the populous. And they get paid handsome sums for this bullsh*t. Why doesn’t he just ride off into the sunset with his bit fat bonus.

  18. No mention of the £14m deficit in the final salary pension scheme. Perhaps an additional levy on IFAs could be reasonable and appropriate to plug the gap.

  19. 18.3%This should just about fund 2010-2011 bonus payments for the FSA for all the good work they do.Well done the FSA keep up the good work.

  20. “Better regulation costs more”

    This sums up the public sector.

    Rather than just accepting that they got things wrong and need to change their approach, they instead blame the fact that they didnt have enough money and need to spend more……

    The problem is a lack of focus, not a lack of people.

    What is also astonishing about this article is that it implies that there are currently c.3200 staff at the FSA costing £347m i.e. over £100k each for 3200 staff!!!

    And I thought the govnt were trying to crack down on public sector pay…..

  21. Guys stop moaning, rebrand as Salesmen or Cannon Fodder.

    It is impossible to attack the FSA from the bottom up, the attack must be from the top down, via your local MP and Parliament.

    Get everybody you know to write to their MP demanding that their savings and investment are protected against the ridiculously high cost of regulation, which is destroying the incentive to invest in the UK, you might suggest honestly that in the current circumstances investment has no worthwhile return and that the best approach might be to invest in Chine – Indian – Brazile or simply go out and buy imports.

    The MP may not turn a nasty shade of green in front of you, but enough letters will start a stamped to the Treasury toilets.

    Remember the power of the pen.

    Finally if you must tick the anonymous box, should you really be in this industry?

  22. Jobs for the boys? Overly paid? If the regulator was to effectively regulate the products, they would need less staff to regulate the advisers. It’s only when products fail that clients feel they have been miss-sold, so if dangerous products were unborn, then complaints would fall, and then there would be a ‘skill’ based adviser where some would be better than others in ‘portfolio management’ but without the worry that a product was inherently poor and no need for a complaint based regulator. However …. The FSA needs to be needed so that they can continue in their highly paid jobs!

  23. Incompetent Regulators Awards Team 17th March 2010 at 5:02 pm

    To Winfield post at 4.05pm. Thanks for the tip. But just in case you don’t know I and many others have been trying for years with local MPs and candidates. All falling on deaf ears. My local conservative candidate has gone to ground and I suspect she is now towing the party line as M Hoban who was our only hope has turned out to pro RDR and knows little about what we do and to cap it is arrogant. I know as I have spoken to him

    Yes I agree, have a go at the MPs but they also read this cr*p we post which gives them a pretty good idea of whats going on. And as far as being anonymous is concerned, I have been in the forefront and in public very often and probably the only IFA who recorded the FSA and caught them with their pants down. But I don’t trust the basta8rds at all. I think you’ve come in on the sceme either a little late or maybe you are too trusting and slightly naive.

  24. F..in bad regulation costs enough!

  25. As usual financial planners will have to pay for the continued failings of the FSA. If they were a business they would have gone to the wall years ago.

  26. Would be a lot cheaper cost for regulation if mr hector ****ked off now

  27. Sants is out of tiny mind. ‘Better regulation cost more’. Is he totally deranged? Better of anything cost less. That’s what capitalism does. Every day, more for less. What he’s doing is bureacratism. It’s the economics of the mad house.

    And as predicted when it failed, the FSA is now going round shooting people for no better reason than it can. This is truly truly disgraceful behaviour. It is latent totalitariansim.

  28. I have seen this industry go from no regulation all the way to the FSA via Fimbra & the Pia. One constant has remained during this period, that is the pressurised sales methods and generally inferior products sold by Banks and sole product provider companies. It seems a shame that the legacy of regulation has been the total destruction of an our industry. The amount of Insurance Compaies & Investment Houses that no longer exist is proof of the regulators incompetence and lack of understanding of the nature of financial services to the general public. Many of thses companies have had to alter their investment course or pay out massive amounts of often unwarranted compensation. This has led to the failure of the companies themselves or the underperformance of the client’s investment. Idiotic & Sad.

  29. I wish I could increase my firm’s budget by 18.3% but we have had to reduce it by over 40%just to survive. No time to do anything about it, too busy trying to abide by FSA regulations and ride their never ending directives.The 18.3% should cover one day’s Canary Wharf lunches for those parisites under Uncle Hector’s lack of control. I would recommend that some of the 18.3% increase in the budget shoud be used for the FSA to put up crosses on which IFAs can hang themselves.

  30. I had to laugh when I read “Anonymous” at 1.42 on the 17th:

    “It’s only when products fail that clients feel they have been miss-sold” (sic).

    Way to go with total delegation of responsibility. You are responsible for your advice. If you are recommending a financially risky product OR company, you should be aware of that and the potential implication to your client.

    Otherwise you’re not “advising” just “opining.”

  31. These posts show truly how the regulators are loathed, yes really and truly loathed by those they regulate or should I say abuse.

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