FSA ups annual funding by almost 10%

The Financial Services Authority has announced its proposed annual funding requirement for 2010/11, which says that the FSA overall funding costs for the next 12 months will increase by 9.9%.

For mortgage brokers, minimum fees payable to the FSA are set to go from £745 to a minimum £1,000, a 34% increase on what brokers were paying before.

The consultation paper published by the regulator on the proposed fee changes reveals that mortgage brokers could even be facing a maximum increase in fees of up to 67%.

The paper also reveals that five unnamed trade associations were against the new minimum £1,000 fee.

Specifically, the trade bodies raised concerns that the FSA has not provided any evidence that the cost of regulating mortgage brokers has increased in proportion to the fee increase.

Overall the funding costs relating to mortgage brokers rose by £3.5m on the budget for last year.

General insurance brokers’ fees are to climb 122% while for IFAs their regulatory bill will go down by 50%.

The regulator says that a more transparent fee structure will mean that 60% of firms will actually pay less.  

The increased cost of intensive supervision will be levied on those firms whose size and impact require the most regulation from the FSA.

The annual funding requirement for 2010/11 is £454.7m, up from £413.8m in 2009/10.  The 9.9% increase reflects the FSA’s intention to minimise any fee increases by concentrating only on essential areas of work:

  • The delivery of the credible deterrence philosophy which is central to the FSA’s supervisory approach;
  • The policy reform programme, driven by the Turner Review, which forms the FSA’s response to the financial crisis and covers critical issues such as reforms to liquidity and capital regimes; and
  • Ensuring delivery of the wider policy agenda mandated by the European Union.  This includes Solvency 2, the review of the capital adequacy regime for the European insurance industry, and the largest project undertaken by the FSA.

“We recognise that any increase in the industry’s costs is unwelcome at a time when margins are under pressure in some segments of the industry. However, the overall increases are necessary to deliver our new intensive supervisory approach.”

Hector Sants, chief executive of the FSA

Hector Sants,outgoing chief executive of the FSA, says: “The way the FSA regulates has changed radically, both in approach and intensity over the last three years.

“We recognise that any increase in the industry’s costs is unwelcome at a time when margins are under pressure in some segments of the industry.  

“However, the overall increases are necessary to deliver our new intensive supervisory approach.  The new fee structure will ensure that the costs are fairly distributed and the increased investment is paid for by those firms who will be subject to the increased scrutiny.”

In 2009/10, the FSA hired 280 new staff as part of its Supervisory Enhancement Programme.  The full year costs of these staff will be represented for the first time in 2010/11 and equates to a 4% rise in total FSA costs.

The FSA says the increase in funding relates to extra investment neeeded to supervise the very largest firms.

When the FSA published its Business Plan for 2009/2010, it increased the amount raised by firms by £117m.

Out of the £117m increase, the regulator said that approximately £70m had been factored in to account for the increase in costs of delivering higher quality supervision over the course of the year.