The city watchdog said yesterday that big banks would bear the brunt of its plans to "get tougher" following a rise of more than £40m in its budget.
The Financial Services Authority, which is funded entirely from levies on regulated companies and fines for wrongdoing, said its annual spending would jump by 10 per cent to £454.7m in 2010-11. "The increased cost of intensive supervision will be levied on those firms whose size and impact require the most regulation from the FSA," the regulator added.
The credit crisis saw the FSA abandon its much-criticised "light touch" approach to regulation in favour of a far more intrusive regime, which has been felt beyond the banking industry.
One casualty was Prudential, which attempted to railroad the FSA into approving its planned £14.5bn rights issue to help fund its takeover of the Asian insurer AIA. The watchdog refused, forcing the Pru to restructure its $35.5bn bid because the FSA was concerned that it would not be able to repatriate enough capital if another economic storm blew up.
The FSA has also been waging an aggressive campaign against alleged market abuse in London which has led to a string of arrests. The Conservative Party abandoned plans to abolish the watchdog when it formed a coalition government with the Liberal Democrats. However, the FSA could still lose some of its powers, which are likely to be transferred to a new agency dedicated to tackling white-collar crime.
The British Bankers' Association accepted that good regulation would cost more but added: "What we have never been keen on is that you spend the money on increasing bureaucracy and not better regulation."
Some of the extra money in the FSA's larger budget will be spent enforcing new rules intended to keep banks and insurers solvent.