Break-up plans force FSA to accept limits
Wednesday 23 March 2011
The Financial Services Authority said yesterday it expects a tough year as it puts new initiatives on hold to cope with the heavy load of extra work created by the Government's plans to break it up.
In its annual business plan the FSA said it expected difficulties in hiring and keeping staff as it splits itself in two in preparation for the Government's overhaul of financial regulation.
At the same time the watchdog is freezing its headcount at about 4,000 for the year after expanding rapidly during the crisis.
Hector Sants, chief executive, said: "The 2011/12 business year for the FSA will be a difficult one.
"We remain mindful of the economic climate and are controlling our costs accordingly. With the regulatory reform programme being delivered alongside our existing priorities, we must necessarily be pragmatic about ensuring we commit to a manageable set of deliverables so as not to over-extend ourselves."
After the giant watchdog failed to spot the looming financial meltdown, the Government is handing the FSA's regulation of banks and other financial companies to the Bank of England and creating a separate consumer protection agency.
Peter Snowdon, a partner at the law firm Norton Rose, said: "It is clear that the restructuring is going to take a lot of resources. The FSA is also dealing with a demanding market and there is so much happening at a European level and I think it is being stretched."
Mr Sants highlighted the increasing power of European regulators and said the FSA and its replacement agencies in the UK would be left "primarily acting in a policy-influencing and national supervisory role".
The FSA will informally divide itself up next month in preparation for the Government's overhaul. In a piece of good news for the regulator, it said yesterday that Margaret Cole, its enforcement head, will stay on when other top executives have left.
Ms Cole will head the FSA's interim conduct division in preparation for the split until the arrival in September of Martin Wheatley, the Hong Kong regulator who will lead the new Financial Conduct Authority.
The FSA confirmed last month's announcement that its forecast annual costs would rise 10 per cent to £500m. Costs charged to companies will not increase because last year's record £79m of fines will be redistributed back to them, the FSA said.
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