High staff turnover rates at the FCA and Prudential Regulation Authority risk undermining confidence in the regulators, according to a report by the National Audit Office.
The report found that more than a third of staff at the FCA have less than two years’ service at the regulator and its predecessor the FSA, while 26 per cent of those who have resigned from the PRA are classed as ‘high performers’.
Staff turnover was 9.7 per cent at the FCA in 2013, and 11.7 per cent at the PRA.
The report says: “Both regulators are working to develop long-term strategies to attract the best talent. However, current levels of staff turnover result in the consistent departure of skilled and experienced staff.
“This could undermine industry confidence in the regulators, poses a risk that knowledge will be lost within the organisations and impacts on the regulators’ capacity to carry out their functions.”
The report also found the combined cost of the FCA and PRA is £664m for 2013/14, 24 per cent higher than the cost of the FSA in 2012/13.
It says the regulators attribute the increase to additional front-line staff, and the costs of running two regulators instead of one, including new IT, support and premises costs.
The NAO says in future it will expect the regulators to demonstrate the value they are achieving for consumers and how they are addressing the problem of attracting and retaining the right staff.
The NAO’s recommendations for the regulators include reviewing the impact of staff turnover rates, and evaluating the cost to firms of regular data requests.
NAO head Amyas Morse says: “These are still early days for the new regulators, and there are encouraging signs that their new approaches are gaining traction.
“Attracting and retaining the right staff are vital to keeping this progress on track, and so both regulators need to tackle this issue.”
An FCA spokesman says: “The fees charged enables us to regulate effectively and cover our wide-ranging remit, but equally it is important we deliver our services in a way that provides value for money.
“Having the balance between experience and those who can bring a fresh perspective is important for the regulator. In recent months we have made a number of high profile appointments who have considerable experience acquired over a number of years in the industry. We have the right team in place with experience inside the regulatory regime and outside it to build on the work of our first year.”