The Financial Services Authority will increase spending by an inflation-busting 7 per cent this year as it tries to hire better staff and to improve practices criticised in the aftermath of the Northern Rock crisis.
The watchdog said yesterday that it would spend £323m in 2008 and that underlying costs would rise by £11.5m. A spokeswoman said the FSA had to pay more to hire quality people to make good decisions. It has also increased employees' maximum bonus to 35 per cent of salary from 25 per cent.
The fees that firms will have to pay to the regulator will increase by 6.9 per cent to £20.6m, the FSA said in its annual business plan, released yesterday.
"I recognise this is an above-inflation increase, but believe that, given the increased risks with which the FSA now has to deal, it will be supported by our fee payers," Hector Sants, the FSA's chief executive, wrote in the business plan. He said that hiring the right people remained "a considerable challenge".
The regulator has spent heavily on hiring better people for its enforcement division, which has been criticised for failing to prevent insider dealing. The FSA warned that it would hand out higher fines and pursue more criminal cases to clamp down on wrongdoers.
Mr Sants, who took over as chief executive last year, said 2008 would present the FSA with more problems and uncertainties than it has faced before. The regulator has been attacked for its handling of the Northern Rock affair and has put in place a swath of reviews to try to prevent a repeat.
He warned that the extra work imposed by the initiatives would force the watchdog to shift spending from the day-to-day monitoring of businesses to strengthening overall regulation.
"The fact that we have a finite budget requires us to make choices," Mr Sants said.Reuse content