FSA continues to contain costs to industry

Howard Davies, chairman of the FSA, said:

"We are meeting our commitments to the industry to be transparent about our regulatory priorities and cost-effective in our use of resources. Our budget is down in real terms, even though:

• the size of the UK financial services sector is growing rapidly;
• we are preparing to take on new responsibilities given to us by Parliament; and
• we have to respond to above-average salary increases in the markets in which we compete for staff.

Priorities for the coming year

The Plan and Budget highlights the main areas the FSA will concentrate on:

• Preparing for a smooth transition to the new regime. This includes finalising the single FSA Handbook of Rules and Guidance and working with regulated firms to facilitate the 'grandfathering process under which their existing authorisations will be transferred without disruption to the new single FSA regime;

• Implementing a new regulatory approach. This is based on a new model for assessing the risks to the FSA achieving its statutory objectives and for using its new range of regulatory tools to deal with these risks;

• Maintaining a high standard of business as usual regulation through the transition. The key projects include:
  - handling changes to the polarisation regime;
  - carrying forward work on endowment mortgages;
  - regulating the sale and marketing of stakeholder pensions;
  - reviewing insurance with-profits business;
  - launching Comparative Information tables on financial products; and
  - a review of the UK listing regime.

New FSA organisational structure

To facilitate the implementation of its new regulatory approach, the FSA will at the beginning of April be moving to a new organisational structure. This will include an additional Managing Director at Board level, to be appointed by the Chancellor, who will be primarily responsible for consumer relations, insurance and investment regulation.

The new structure also involves a number of appointments and moves at Director level as follows:

David Kenmir (37) will move to be Director, Investment Firms, reporting to the future Managing Director. He is currently Director responsible for implementing the FSAs new regulatory model across the organisation including work on regulatory themes. He was previously the FSAs Head of Authorisation. Prior to joining the FSA, he held senior posts at the Securities and Futures Authority.

Carol Sergeant (48) will move to be Director, Risk Assessment, reporting to Phillip Thorpe. She is currently Director Strategic Change Management responsible for the organisational and operational change programme leading to the FSA taking over its new responsibilities. She was previously Director Banks and Buildings Societies at the FSA. Prior to joining the FSA she held a number of senior posts at the Bank of England.

David Strachan (37) will become Director, Deposit Takers, reporting to Michael Foot. He is currently Head of Market Conduct and Infrastructure in the FSAs Markets and Exchanges Division. His current responsibilities include implementation of the market abuse regime, standards for alternative trading systems and market surveillance. Prior to joining the FSA, he held a number of posts at the Bank of England

Cost-effective regulation

The budget for the FSA's mainstream regulatory activities (the control total) in 2001/2002 is 164 million - just 0.9% above the budget for 2000/2001 in nominal terms. The FSAs mainstream regulatory activities cover financial services regulation that is subject to year-on-year management as part of the FSAs budget process. The control total excludes, for example, the costs of the Pensions Review work, which will disappear over time, and the costs of the UK Listing Authority which is accounted for separately.

Notes for editors

1. The FSAs Plan and Budget 2001/2 is available on the FSAs Website www.fsa.gov.uk/pubs/management/index-2001.html

2. Around 83.3 million of the total budget will be met by fees levied by the FSA on banks and other institutions that it regulates directly. The remaining costs will be met by payments from those bodies to which the FSA will continue to provide a regulatory service until the implementation of the Financial Services and Markets Act. The fees for firms that are regulated by these other bodies will be set by those regulators or by Parliament, as provided for in current legislation. The fees payable by individual firms regulated by those other bodies will reflect not only the FSA's budget, but also the reserves position of those various regulators.

3. The budget for 2001/2002 does not anticipate the significant extra responsibilities the FSA will take on after the full implementation of the Financial Services and Markets Act. This means that in future years there will be a number of step changes in the control total budget as new functions are added, but this will be spread over a wider constituency of fee payers. There will also be some incremental costs arising from our more extensive responsibilities after implementation of the Act in areas like consumer education and reducing financial crime.

4. The FSA took over on 1 May 2000 the role of the UK Listing Authority. The costs of the listing authority are borne by listed companies who form a distinct group of fee payers, and it is the FSA's firm intention that there should be no cross-subsidy either way between the Listing Authority and the FSA's other activities. The 2001/2002 Budget for the Listing Authority is 10.5 million - a drop in real terms over the annualised forecast out-turn for 2000/2001.

5. Details of the FSAs new organisation structure can be found at Appendix 5 of the Plan and Budget 2001/2002. The appointment of Philip Robinson as Director of the Pension Review from 1 February was announced in FSA Press Notice 004/2001.

6. The FSA has direct responsibility for the supervision of banks and markets and exchanges. It supplies regulatory services to the three self-regulatory organisations (IMRO, PIA, and SFA), to the Building Societies and Friendly Societies Commissions, to the Chief Registrar of Friendly Societies and to HM Treasury (for certain insurance matters). When the Financial Services and Markets Act is implemented, the functions of the SROs, the Commissions, the Chief Registrar and HM Treasury (re insurance) will pass to the FSA.

7. A consultation paper (CP82) entitled Fees 2001/2002 has been issued today, setting out the FSA's proposals for those firms directly regulated by the FSA. Consultation Paper 82 is available on the FSA's Website.

8. Further details of the FSAs consumer orientated work as described in the Plan and Budget 2001/2002 can be found in FSA Press Notice 012/2001 issued today.

9. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; the protection of consumers; and fighting financial crime.

10. The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.