FSA publishes budget and fee information

United Kingdom
The approach of the Financial Services Authority ("FSA") has been further clarified by the issuing of its Plan & Budget 1998-99 and Consultation Paper 6 - Fees 1998/99. The FSA claims that it "has made progress towards creating a single regulator and delivering efficiency gains to customers and the industry".

FSA Plan & Budget 1998-99

The budget of £153.9 million shows a small decrease in real terms compared to the aggregate of its constituent regulatory bodies for this year of £153.5 million. Howard Davies, chairman of the FSA, recognises that some investment will need to be made in property and IT systems but hopes that the integration of the various regulators under the FSA umbrella will lead to cost savings.

Integration has already begun. The FSA and its constituent regulatory bodies have adopted a common approach to the issues raised by Economic and Monetary Union and the Y2000 issues. The FSA is now preparing for N2, the date on which it acquires the full range of powers under the regulatory reform bill, expected to be around the Millennium. The FSA has moved into its new head office at Canary Wharf and hopes to create "one-stop shopping" wherever possible.

The FSA Central Policy Division will be publishing a document this summer, outlining the FSA's regulatory approach after N2. The FSA "manual", which will set out what the FSA requires and expects from those within its jurisdiction, will be available from N2.

The FSA will raise revenue from four sources:

  • statutory fees in relation to authorised banks, listed money market institutions and related clearing houses
  • statutory fees in relation to the bodies supervised under the Financial Services Act 1986
  • income received from the SROs for services provided under contracts
  • miscellaneous income (e.g. from the sale of publications)

The Chancellor and the Bank of England have made a number of appointments of executive and non-executive members to the FSA board (see 2.7 above), but some of the senior and middle management positions have yet to be filled. Uniform terms and conditions of employment have been prepared and all relevant staff currently employed by the FSA, the Bank of England and the SROs will be employed on the same terms.

Consultation Paper 6 - Fees 1998/99

This consultation paper includes five draft regulations setting out the fees to be levied by the FSA. The FSA's policy on setting its fees is based on the allocation of its costs to the appropriate recognised bodies, category of firms or banking supervision.

The FSA has attempted to set its fees for the coming year at a level where it will recover its budgeted costs for the year. The budget shows a reduction in the cost of the FSA's continuing activities and banking supervision, compared with 1997/98. The total amount of fees to be raised for 1998/99 is £68.1 million, which will be sufficient to cover the FSA's budgeted costs for the year of £66.8 million.


The issuing of Budget and fee information at the same time is an indication of the emphasis which FSA places upon being seen to be cost-effective. Helen Liddell told a conference organised jointly by the Law Society and Cameron McKenna that "regulation will not be working if it is not cost-effective" but cost-effective does not necessarily mean cheap, and as the costs of regulation are largely borne by consumers, the FSA will need to keep costs reasonable in order that consumers are not penalised.