The Financial Services Authority (FSA), the UK regulator, will spend 201.6 million on its “mainstream regulatory activities” in 2004/05. This is 2.2% higher than 2003/04 – and it is, of course, paid for by the firms that it regulates. Fees will go up 1.5% during the year.
So regulated firms will be horrified to read that the “business plan” published yesterday promises to make the FSA “a more effective organisation.” But where will the money go? The “business plan” promises, in essence, more of the same. There are no major initiatives, though fund managers are singled out for a campaign to improve their “accountability and transparency.”
Of course, the FSA knows better than most that its growth depends on a steady flow of financial scandals, especially in the retail sector, so anybody selling financial products to retail investors can expect to be drawn into an anti-misselling initiative of some kind, where plenty of misselling will be uncovered. In such cases, effectiveness will be a secondary consideration to that old public sector trick of advertising the need for the FSA to be equipped with more resources if it is to prevent such things ever happening again.
Most of the budget will be spent by the FSA on itself, since the FSA has now expanded its empire to include the regulation of mortgage business and general insurance brokers. “This will more than double the number of firms the FSA regulates and a smooth and effective transition to statutory regulation for these areas is an important priority for us,” explains FSA Chief Executive John Tiner. Smooth and effective? Expect hefty investment in lawyers and IT systems.