Whilst Government departments are struggling to slash £6bn of costs and the new Chief Secretary to the Treasury David Laws scrutinises all recently signed Government contracts, the FSA is suggesting that it needs to increase resources.
Pain told delegates at a City and Financial Intensive Supervision Conference this week that its intensive supervision regime required more resource, declaring that: “To continue to deliver and fully embed our intensive approach, we need to continue to increase our overall resource and ensure that the training provided enables supervision to deliver our agenda.”
The FSA appears to think that because it is funded by the industry and not the taxpayer it is immune to the current cost saving measures being enacted across the public sector.
Perhaps it is emboldened by the likelihood that the coalition Government will retain the regulator and believes that, politically, it is fine to slap the financial services industry with higher costs.
These would be careless assumptions to make. Many of the firms regulated by the FSA have struggled to stay in business throughout the economic crisis and are likely to continue to struggle as the new Government’s tough measures to reduce the deficit hit home.
For IFAs, you can of course add the huge amount of time and money that is being spent changing their business models and increasing their qualifications ahead of the retail distribution review and the grossly unfair Financial Services Compensation Scheme levy.
Against this background it is surely wrong for the FSA to talk about increasing its resources and thus the levies that will be paid by the financial services industry.
If the FSA is going to continue with its current highly aggressive strategy in the way it supervises the industry -through increased use of section 166s, banning orders or blocking reauthorisations – its supervisory staff take on more power and responsibility. This means better qualified and better paid staff are required.
But if this shift in focus was made by a Government department, particularly at this time, it would more than likely require a realignment of resources with cuts made in other areas.
You have to question whether this same financial discipline applies to the FSA when it knows it can tap up the industry for extra sums rather than have to make difficult cut-backs elsewhere or battle with the Treasury for extra funding.
The National Audit Office has taken on responsibility for auditing the FSA, beginning this financial year. Will it be able to keep the regulator in line?