By Simon Miller
The UK's Financial Services Authority (FSA) has proposed a 15.6% increase in its annual funding requirement (AFR) for its last year in existence.
The FSA - which splits up into the the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA), in 2013 - has increased the AFR to £578.9m for 2012/2013, up from £500.5m.
The regulator said it recognised the difficult economic circumstances for many firms and was committed to keeping any essential cost increases to a minimum. It added that it would achieve this by capping staff levels for the second year in a row and restricting core operating costs too, broadly in line with inflation.
The increase in fees will be borne mainly by larger firms, reflecting the resources applied to intensive supervision of high impact firms. Medium sized firms will see a proportionate increase reflecting the type of business they conduct. Currently 42% of the FSA’s authorised firms need only pay the FSA minimum fee and for the third year running the gross minimum fee for firms will remain unchanged at £1,000.
Ahead of the split in to the PRA and FCA the FSA is to reorganise internally and move to a twin peaks model that will begin to reflect the shape of the new authorities.
Hector Sants, FSA chief executive, said: "The year to April 2013 is expected to be a challenging one for the FSA. We will be moving to a twin peaks model internally ahead of the split into the PRA and FCA, whilst at the same time continuing to focus on our supervisory role in a very difficult economic environment. We are mindful of any increase in costs to industry and have continued to maintain headcount and keep core operating costs in line with inflation."
He continued: " "Much of the increase in AFR is the result of the additional resources needed to implement the new regulatory structure but these costs for the restructuring are in line with government forecasts. The FSA will continue to deliver intensive and intrusive supervision and develop the key policy initiatives but we are not planning any new discretionary initiatives. The principal initiatives are progressing the domestic consumer protection strategy, implementing a number of key EU directives and influencing the continuing international regulatory reform agenda."
The FSA levies fees on behalf of the Financial Ombudsman Service (FOS), the Financial Services Compensation Scheme (FSCS) and the Money Advice Service (MAS).
The total MAS budget for 2012/13 is £86.8m, up from £43.7m in 2011/12 reflecting the decision by the government to move debt advice to the MAS. Debt advice was previously government-funded. The FSA is consulting on the allocation of the debt advice costs to the relevant fee blocks.