Howard Davies, Chairman of the FSA, said: "Our first 12 months of operation as the single statutory regulator coincided with some of the most difficult conditions experienced in financial markets in living memory. Against this background, and taking into account the findings of our recently published Financial Risk Outlook, we have set out our work priorities and allocated our budget for the year ahead. Our proactive risk-based approach to regulation has also helped us identify five particular areas where we believe we need to apply more resource next year.
- "Enforcement: financial firms strongly support effective enforcement action against persistent offenders as a key task for the FSA and we will devote more resource to this next year including increasing staff in our enforcement division by around 10 per cent;
- "Consumer intelligence: we will do more to pick up potential threats to consumers earlier, such as exaggerated claims in financial promotions or from undisclosed product risks, and to respond to these quickly and effectively. We therefore plan to devote more resource to monitoring the retail markets; to analysing new products and the financial promotions which go with them; and to proactive policing of such promotions;
- "International regulatory developments: regulatory change in the UK is increasingly driven by developments in European Union financial services legislation including the forthcoming capital adequacy-related Directive to implement the revised Basel Accord for EU countries. So we will be increasing our resources devoted to European policy making and to preparatory work for Basel implementation.
- "Listing: recent experience has shown that the existing Listing Rules may fail to highlight risks for investors in certain types of prospectus. We will increase resources in the Listing Authority to improve its linkages with others parts of the FSA and to bring in special expertise related to those listing documents which may be particularly marketed to retail investors;
- "Consumer education: the Sandler Report recommended a step change in the resources we devote to our consumer work. We will be increasing our expenditure in this area next year, working as far as possible in partnership with others, particularly financial themselves. We recognise the need for more public awareness activity on consumer borrowing and debt and our consumer education and information materials will tackle these issues.
- "The cost of these and other work priorities described in the Plan are offset by efficiency savings we have made over the last year. We have also absorbed significant increases in pensions and accommodation costs. The net effect is a budget for 2003/04 which is only slightly higher in real terms than last year. We hope that the overall balance of effort we propose for the coming year will be seen as a reasonable judgement by both the industry and consumers."
The overall purpose of the FSA is maintaining efficient, orderly and clean financial markets and helping retail consumers to achieve a fair deal. We are again in this year's Plan organising our work around four strategic aims relating to Consumers, Firms, Markets and the Regulatory Regime. The strategic aims and associated work priorities are described in greater detail in the Plan.
Cost-effective regulation
The budget for the FSA's mainstream regulatory activities (the 'control total') in 2003/04 is £200.5 million.
Paul Boyle, FSA Chief Operating Officer, said: "On a like-for-like basis the budget is 3.1% higher than for 2002/03 - a small increase in real terms.
"Our costs for next year will include substantial increases for rent, insurance and the FSA pensions scheme. We have been able to offset most of these increases through improvements in our economy and efficiency equating to savings of £8.6m. We can already identify further cost pressures in 2004/05 and during the coming year we will be looking for further opportunities to improve our efficiency and increase our regulatory effectiveness."
Background
- The FSA's Plan and Budget 2003/04 is available on the FSA's Website www.fsa.gov.uk.
- Also published today and available on the Website is Consultation Paper 168 Fees 2003/04 which sets out the FSA's fee proposals for the firms it regulates directly.
- The FSA's Financial Risk Outlook 2003 was published on 22 January 2003. This looks broadly at the risks related to financial services and the wider environment in which they operate and provides the background for the FSA's priorities as set out in the Plan and Budget 2003/04.
- The FSA's Strategic Aims set out in the Plan and Budget 2003/04 are:
- Consumers - "Consumers are better able to make informed choices and achieve fair deals in their financial dealings."
- Firms - "Regulated firms and their senior management behave with integrity and treat their customers fairly."
- Markets - "Consumers and other participants have confidence that markets are efficient, orderly and clean."
- Regulatory Regime - "An appropriate, proportionate and effective regulatory regime is established in which consumers, firms and other FSA stakeholders have confidence."
- The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection of consumers; and fighting financial crime.
- The FSA aims to maintain efficient, orderly and clean financial markets and help retail consumers achieve a fair deal.
