THE FINANCIAL Services Authority (FSA) needs almost 16 per cent more cash this year to fund its separation into two bodies, the watchdog confirmed yesterday.
In the FSA’s final business plan, written and printed before news of chief executive Hector Sants’ departure emerged, the chief says “our main focus… for the coming year” is to move to a “twin peaks” model before officially splitting in 2013.
The FSA will be scrapped and replaced by two authorities – the Prudential Regulation Authority for supervision of banks and insurers, and the Financial Conduct Authority to monitor financial firms and markets.
To do this, the FSA needs £32.5m in restructuring costs and £22.4m for an improved IT system, which both contribute to a 15.6 per cent hike in the annual budget to £578m.
The jump in costs will be borne mostly by larger firms, it said, with the top ten companies paying 28 per cent of fees.
The regulator added: “This rate of growth cannot continue indefinitely, particularly when the financial services industry continues to be under pressure and so we would like to emphasise our commitment to ensuring direct costs of regulation are proportionate.”
Firms should also find out this year how they will be expected to fund the Financial Services Compensation Scheme, as the FSA pledged to finish its review of the levy by September.
The business plan also lists Sants (pictured) as the designer of the PRA’s structure, headcount and first year budget. It is not clear who will take over this task.
The watchdog also said it will soon publish plans to make it easier to block directors of failed banks from returning to the financial sector, in the wake of the RBS bailout. It will also re-examine client asset rules following the collapse of MF Global last year.