FSA budget tops £500m

The FSA’s budget has topped half a billion pounds, the regulator has announced.

The FSA announced today that its proposed Annual Funding Requirement (AFR) for 2011/12 will be £500.5m, compared to £454.7m in the current financial year - an increase of 10.1% in its overall requirement.

The FSA says the increase will be borne by larger firms, with the minimum fee remaining frozen at last year’s level. And it says that once a discount for enforcement fines discount is taken into account, this minimum fee will be 9.4% lower than last year:

The FSA says 43% of the firms that it authorises will only pay the minimum fee.

The increase in the overall AFR reflects the organisational and technological costs of increased supervision of firm and the implementation of major international regulatory reforms, including the European Commission’s Solvency II directive. It also covers the costs of reorganizing the FSA into two new separate bodies- the Prudential Regulatory Authority and Consumer Protection and Markets Authority.

FSA chief executive Hector Sants said: “The completion of the FSA’s changes to move to a more intensive approach to financial services regulation has inevitably led to some increase in the Authority’s cost base. However, we are very mindful of minimising the additional cost to firms and are pleased that net of enforcement fines, the actual amount we will be billing firms will be falling by 2%.”

“Longer term, the implementation of new UK and EU policies, along with the cost of managing the transition to two new authorities will continue to put upward pressure on our cost base. However, in general, we would expect these increases to be borne by larger and more complex groups and would hope to minimise the impact on smaller firms.”