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FSA does not have the resources to review the costs of regulation

The Treasury select committee says it would be “impractical” for the FSA to review the cost of regulation and has recommended that the PRA and CPMA should conduct a review under the new structure.

The FSA has refused to commit to a timescale for consulting on reforming the Financial Services Compensation Scheme, despite widespread adviser anger over the latest £93m interim levy.

It was expected to publish a consultation paper in November but says it is now waiting for the new regulat- ory structure to be finalised.

In its report on regulatory changes, published last week, the select committee says: “Given the urgency of the Government’s reform programme and the resources and time needed to produce a further full study of the costs of regulation, it will be impractical for the FSA to devote resources to such a review at this stage.

“Once the new architecture has been set up, we recommend that the PRA and the CPMA revisit the whole issue of cost of regulation, in the light of the financial crisis and the changes in regulatory structure.”

Last week, select committee member George Mudie told Money Marketing a review should go ahead and if the FSA does not have the time to do it, it should outsource it to an independent body.

Treasury financial secretary Mark Hoban told the committee last week the current provision under the Financial Services and Markets Act for the National Audit Office to look at whether the FSA is providing value for money is “underused”.

He said he would look at further ways to gauge the value that the new regulators offer to fee-payers.

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  1. I find it frankly incredible for the TSC to claim that it would be impractical for the FSA to review the costs of regulation.

    Firstly, the cost of the FSA alone will shortly be in excess of £500,000m a year, not least due to the fact that the average yearly remuneration package of its staff and directors is nearly £93,000. These are staggering figures, not least when one considers the FSA’s litany of major regulatory failures for which no sanctions whatsoever have been imposed because it [the FSA] is and remains completely unaccountable to anyone. Yes, there’s the odd token appearance of Hector & Adair before the TSC, but nothing ever comes of those appearances. In fact, the only person ever to be publicly sanctioned was Clive Briault and he was eased out with a compensation for loss of office package estimated to be worth £612,000.

    What about a programme of clear and unequivocal measures to CUT the costs of regulation, not just in terms of what the FSA itself spends but in terms of the compliance costs for those it regulates? What about relocating three quarters of the FSA’s workforce to a vastly less expensive location than Canary Wharf? Why do 3,300 people need to be based in some of the most expensive office premises in the country? They don’t.

    What about hewing at a stroke £21m off the FSA’s annual operating budget by cancelling its bonus pot? What about a root and branch reform of its expenses budget? What about limiting dramatically the colossal sums routinely pissed away on outside consultation exercises? What about outlawing the practice of regulation by hindsight which costs the industry tens of millions of pounds every year? The list goes on and on.

    Is the TSC unaware of all these areas in which major cost savings could be accomplished? The reason the FSA claims not to have the resources for such a review is that it doesn’t want to undertake one. It does, in fact, have the resources to do more or less anything it cares to, for the simple reason that it has what it perceives to be a bottomless pool of money on which to draw. And if it won’t undertake such a review, then somebody else needs to do it instead.

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