Staff have been quitting Britain's financial watchdogs at nearly twice the rate since they were split into two bodies this year, data seen by Reuters shows, at a time when experts warn of a regulatory brain drain in Europe's biggest financial hub.
Britain broke its financial regulator up into two separate agencies in April to ensure stricter scrutiny of banks and markets in the wake of the 2007-09 financial crisis and a series of costly scandals involving bankers' misdeeds.
But the rate of resignations has nearly doubled at both the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA), the two bodies that replaced the Financial Services Authority on 1 April.
That raises concerns about the new bodies' ability to retain staff capable of carrying out tougher, more interventionist regulation.
“It's a concern for regulators and they will continue to see a tremendous amount of pressure on keeping their employees,” said Etay Katz, regulatory partner at law firm Allen & Overy.
According to data provided by the two bodies under Freedom of Information Act requests by Reuters, staff have been leaving the FCA since its formation at an annualised rate of 12 percent and the PRA at a rate of 11 percent.
The FCA provided data covering its first six months through the end of September and the PRA provided data for its first five months through the end of August.
By contrast, staff turnover in the final year of the now-defunct FSA was 6.9 per cent. It averaged 7.8 per cent turnover per year for the past five years.
Since the split, the new FCA is now tasked with cracking down on wrongdoing by financial firms, while the PRA took on responsibility for making sure banks and insurers have adequate capital to cover their potential losses.
Some 162 out of about 2,575 staff left the FCA during its first six months of operation, and 50 out of about 1,080, including 11 temporary workers, left the PRA during its first five months, the data showed.
Most of the departing staff at the FCA were replaced - net staffing was down by just 22 people at the end of September - while most of those who left the PRA were not - overall headcount at the smaller body was down by 37.
The exodus goes right to the top. In its final year, the FSA lost its boss Hector Sants and head of enforcement Margaret Cole. Since splitting, the PRA has lost deputy chief Paul Sharma and a senior supervisor, Jean Moorhouse, and the FCA has lost its acting director of retail, Christina Sinclair.
All left to enter private practice.
The last three years have seen banks and consultancies in London - which have cut back drastically in other areas - add thousands of junior staff in compliance, risk and legal functions to deal with a flood of new rules.
Staff typically earn far more in the private sector than at the regulators, and experience at a regulator can improve long-term career prospects, recruitment sources said.
“The more the regulatory pressure increases, so does the risk of the FCA and PRA losing staff. It really can become a vicious circle,” Allen & Overy's Katz said.
“My concern is more on the FCA side. How are they going to attract the calibre of people when banks are paying two or three times as much?”
Regulators have said they need to improve efforts to hire and retain staff, including a need to pay competitively. A think tank of former central bankers, the Group of Thirty, chaired by former European Central Bank President Jean-Claude Trichet, said recently that supervisors should be paid more.
The FSA paid its staff an average of 75,000 pounds in the year to March. That was up 24 per cent from five years earlier and compares well to other jobs in the public sector, but is just a fraction of the average pay of about £190,000 including pension and benefits at Barclays' investment bank, for example.
A compliance officer at a London investment bank can expect a salary of between £80,000 and £130,000 and a junior compliance officer gets £50,000-70,000, according to a 2012 survey by recruitment firm Alexander Lloyd. Those salaries can be significantly topped up with bonuses.
Other regulators, including the European Central Bank, are also adding staff, and headhunters said there is a limited pool of top staff with regulation experience.
Peter Hahn, a former banker now a member of the finance faculty at London's Cass Business School, said an increase in turnover was welcome as staff at banks and regulators need experience of both as regulation becomes more complex. But he said the movement needs to be in both directions.
“At some point there has to be more of a flow of key people between regulators and banks. It's important it starts to be accepted that it goes both ways over time,” Hahn said. “At the moment, it's a one way road.”
Despite the increase in departures, an FCA spokesman said staff turnover was broadly in line with historical rates at the FSA and low given the huge changes of the last year. The body continued to attract new staff from other regulators, he said.
The PRA also said it continued to attracted talented people.
Since the annualised data do not cover a full year, the turnover trends could be affected by seasonal factors. But industry sources said a bigger factor was likely to have been the impact from creating the new organisations.
Of the 39 permanent staff to leave the PRA, 13 said they left due to prospects, 12 said they resigned for personal reasons and 10 cited a career change. At least nine joined banks and six went into insurance, according to the data.