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FSA’s annual costs up by 10%

The FSA’s budget is rising by 10 per cent for the next financial year, driven by the £10.9m cost of moving to the new regulatory structure.

The FSA published its business plan for 2011/12 this week. It confirms its annual funding requirement will rise from £454.7m in 2010/11 to £500.5m in 2011/12.

The regulator says it will spend £10.9m on splitting its work between the Financial Conduct Authority and the Prudential Regulation Authority, which will replace the FSA by the end of 2012.

In total, firms will pay 2 per cent less in regulatory fees compared with the previous year because of the level of enforcement fines the FSA collected in 2010/11.

The minimum fee, paid by 43 per cent of the FSA’s authorised firms, including many IFAs, will fall 9 per cent from £925 to £844.

Due to the cost of regulatory reform, the FSA says it is not planning any new regulatory initiatives and will cap the headcount at the current level of 4,000 full-time staff.

Staff costs at the FSA are going up by 4 per cent from £246.9m to £359.5m. There will be no general pay rise for employees over the next year but the rise is due to rising pension contributions.

The FSA has a £110m deficit in its final-salary pension fund and the scheme stopped accruing benefits in April 2010. In 2011/12, the regulator will increase its total annual contribution to the fund from £14m to £19.5m.

FSA chairman Adair Turner says: “As we prepare for the transition to successor bodies, we have frozen our headcount at its current level. Since people are our main resource and cost, that will ensure future total costs are contained.”

The risk division of the FSA has seen the biggest increase in resources for 2011/12, with the budget for the risk business unit rising by 18 per cent from £140.2m to £165.8m. The FSA says this increase is due to the additional staff needed to develop emerging policy, the cost of the regulator’s intensive and intrusive supervisory approach and the cost of fighting market abuse and financial crime.

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