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.”