After being heavily bombarded with criticisms for its key role in the global economic turmoil, the Financial Services Authority verbalizes costs of maintenance will increase as high as 16% in the next coming year prior its functions will be broken down under a new regulatory structure of the City.
It is said that the majority of the £78 M will be for the set up of the new regulatory authority and an IT upgrade as well which consequentially will take the FSA’s budget to £578 M, although the regulator asserts that the cost for the following such as core work, monitoring, execution and reinforcement of ordinances was to be expected not to go beyond inflation.
Among those voicing concerns on whether the money will not be squandered on administrative costs are the insurers and banking groups and reiterated warnings that whatever excess amount charged will be passed on to the consumers.
“We are in favour of smart, effective and growth-focused regulation,” said the British Bankers’ Association. “We know this costs money. But we want to see an increase in fees going on quality regulators and not a hike in bureaucracy and red tape.”
Otto Thoresen, representing the Association of British Insurers stated “This massive increase in regulatory fees comes in a year when insurers already face increased costs. Some will inevitably be passed on to the small companies and private individuals who are customers of the insurance industry, at a time when they can least afford it.”
The breakdown of the new regulatory functions which will require at least £32m of funding is to be distributed into two new bodies which are the prudential regulation authority, which will sit within the Bank of England, and the financial conduct authority. The additional funding of £22m will be needed as well for the IT upgrade for sectors of the group that will comprise the FCA.