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Banking commission: FCA must cut costs and downsize

FCA-FSA-Building-700x450.jpg

The parliamentary commission on banking standards says the Financial Conduct Authority must cut costs and become “smaller and more focused”.

In its final report, published this week, the commission says rising costs as a result of the changeover from the FSA to the FCA and Prudential Regulation Authority should only be transitional.

The FCA and PRA have a combined total budget for 2013/14 of £646.3m, with £432m allocated to the FCA. The total budget represents a 15 per cent increase on the FSA’s budget of £559.8m for 2012/13.

In March, FCA chief executive Martin Wheatley said the expanding remit of the regulator into consumer credit regulation next year will lead to rising regulatory fees.

The commission states: “A strategic aim of the FCA should be to become a smaller, more focused organisation.

“The commission recommends the FCA replicate the Bank of England’s stated intention for the PRA to operate at a lower cost than its equivalent part of the FSA, excluding what is required to fund new responsibilities. The FCA should set appropriate timescales for implementation of this recommendation.”

The commission questions how effective the FCA will be at transitioning to a new regulator because it is based in the same building with many of the same staff.

It also recommends the Treasury select committee undertakes a review of the new regulatory structure in April 2016.

The paper rejects FCA calls for the power to suspend individuals under investigation, but accepts its request to extend the three year time limit for enforcement in some cases.

Highclere Financial Services partner Alan Lakey says: “There are arguments the FCA is empire building so it would be good to cut the number of employees down to a manageable level and get them out of expensive offices.”

PCBS

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Comments

There are 15 comments at the moment, we would love to hear your opinion too.

  1. A lot of what is coming out in this report seems very sensible.Obviously has little chance of being implemented then!!

  2. For the FCA to be smaller and more efficient they need to admit to themselves it aint right now and action must be taken – ooops sorry you need integrity for that.
    heyho

  3. Roman Duzinkewycz 19th June 2013 at 9:00 am

    I think the FCA needs to start employing people who know what they are doing and the ‘cut costs and downsize’ will naturally follow as the wasters are removed – if this was a commercial venture, Sants would be in prison and the business bust.

  4. Sorry !!! are my eyes deceiving me this morning ? has the world gone mad ? is someone actually making sense ? is it the 1st of April ?

  5. Julian Stevens 19th June 2013 at 9:22 am

    This seems to be a long overdue step in the direction of an Independent Regulatory Oversight Committee. As ever:-

    The Regulators’ Compliance Code is a central part of the Government’s better regulation agenda. Its aim is to embed a risk-based, proportionate and targeted approach to regulatory inspection and enforcement among the regulators it applies to.

    Our expectation is that as regulators integrate the Code’s standards into their regulatory culture and processes, they will become more efficient and effective in their work. They will be able to use their resources in a way that gets the most value out of the effort that they make, whilst delivering significant benefits to low risk and compliant businesses through better-focused inspection activity, increased use of advice for businesses, and lower compliance costs.

    The Statute is there ~ when is Parliament going to enforce it and put a stop to this particular regulator totally ignoring it? Others don’t, so why should the FCA be allowed to?

  6. About time to. Still for the staff FCA staff who are made redundant they will leave with an enhanced redundancy package, defined benefit pension entitlement unlike the IFA’s driven out of business.
    With 55% of bank advisers and 30% of IFA’s gone I hope the cuts are at least in proportion but I very much doubt it as more regulation needs more regulators to enforce and justify their positions. Regulation is a Business at they have button off the hand that feeds them

  7. “rising costs as a result of the changeover from the FSA to the FCA and Prudential Regulation Authority should only be transitional.”

    As if that’s going to happen?

    What is going to happen though is there are going to be less and less advisers to support 15% budget increases. It’s time this was sorted because something has to give.

  8. Can’t see this happening myself unless the whole regulatory structure changes and that seems unlikely.

  9. When there are not enough regulated Firms/Advisers left to pay for the FCA something has to give, either the FCA reduces their costs or they increase charges to the remaining. Balancing the books seems to be a big issue with most Quango’s

  10. Hot air,waffle and blowing smoke up the collective proverbial a+se !!!

  11. I seem to remember a recent set of comments where I suggested the FCA moved to the old Pfizer site nr Sandwich as it would be cheaper than Canary Wharf, they can be more independent and less able to have cosy relationships with the big boys, and there are plenty of unemployed people down there who will work for a lower salary, probably better as well.
    But don’t think this move will lead to a loss of dignity, they used to make Viagra there so a good portion of the workforce will be proud!
    Anyway, it appears that the commission must read these comments as they agree with a move to a cheaper location as well as decreasing costs.

  12. @ James – FA’s will only pay a small proportion of the regulators fees, the majority will come from the large banking and investment organisations/firms. IFA’s going out of business wont have a significant effect.

  13. @ Matthew
    Does that fact make you happy?

  14. @ lol
    Why on earth would that make me or anyone happy?

    Im just pointing out that people think a reduction of IFA’s will have an effect on the regulator and I dont imagine it will.

  15. The reduction in Adviser FCA fees will be about 20 million. Now that’s quite a salary and pensions bill that won’t be funded so the money has to come from some where, increased fees for the remainder or FCA staff reductions. You can’t have it both ways

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