The Financial Services Authority (FSA) has today published its Business Plan setting out its priorities for 2010/11.
The Plan is a demanding programme of work for the year requiring greater policy and supervisory resources, and focusing on a number of key areas:
- Delivering effective supervision backed by credible deterrence in enforcement.
- Continuing to embed the organisational and cultural change needed to implement intensive supervision.
- The policy reform programme driven by the Turner Review and the wider policy agenda mandated by the European Union.
- Playing a role in promoting financial stability should the Financial Services Bill be enacted.
The FSA will be recruiting an additional 460 staff in 2010 to implement Solvency 2, and to deliver the intensive supervisory approach needed for the very largest firms.
Hector Sants, FSA chief executive said:
"Intensive supervision is inherently more confrontational. Our supervisors are making judgements both about the robustness of the business models of firms and the suitability of the products they are selling. We will then intervene promptly if we anticipate problems.
"This proactive approach to supervision requires significantly more people than the old reactive model and those individuals must be of a higher quality and supported by more sophisticated systems. If society wants a more proactive approach it must accept that it will have a larger and more expensive regulator."
In developing intensive supervision the FSA’s regulatory approach has moved from retrospective intervention to proactive challenge. Supervisors now make judgements on firms’ business models; intervening early if they anticipate any risks that may arise from the firms’ conduct, selling practices, senior management competence or product development.
This rigorous approach demands more high quality staff, industry knowledge and the will to challenge the industry robustly where potential threats to consumers or the wider market are identified. These are central to the FSA’s plans and will help deliver better outcomes for consumers.
Credible deterrence underpins the FSA’s supervisory approach, and in the last 12 months there have been three insider dealing prosecutions, and a number of other individuals charged with both insider dealing and making false and misleading statements to the market.
The FSA will continue to play a leading role in influencing regulatory reform on the global stage, while ensuring that the UK arrangements on key issues of capital and liquidity are consistent with international standards. This is vital if UK firms are to operate in a consistent way across major financial centres, and London is to retain its place as a major international financial centre.
Hector Sants said:
"The 9.9% increase in our annual funding requirement provides the FSA with the income that it needs to continue to deliver high quality monitoring of the financial services industry, along with international regulatory reform."
The structure and priorities of the business plan reflect the provisions in the Financial Services Bill which is currently before parliament. If the bill is enacted, it will formally give the FSA a new financial stability objective, and will also remove its existing objective of public awareness, instead requiring the FSA to establish a new consumer financial education body.
Although this year’s annual funding requirement has increased by 9.9%, 4% of this is from the supervisory enhancement programme that begun last year. The balance comes from the additional 460 staff to be recruited by the end of 2010.