The combined annual funding requirement (AFR) for the FCA and Prudential Regulation Authority (the new bodies which have replaced the Financial Services Authority) were published today and reveal the two will need £646.3m for 2013/2014, a 15% increase on the amount required for 2012/2013 by the FSA.
This is above the predicted £600m, and will see medium-sized firms subjected to a proportional increase in fees and larger firms funding the biggest share of the increase. The minimum fee of £1,000 remains unchanged and will apply to 42% of FCA authorised firms.
Of the total £646.3m, the FCA accounts for £432.1m and the PRA £241.2m.
According to Chris Hannant, policy director at the Association of Professional Financial Advisers in the UK, the increase in fees for the “advice block” will be 13% more than last year.
“Costs for the new regulator continue to escalate, as they did with the FSA in recent years, at a time that other public bodies are being asked to cut back their budgets,” said Hannant.
“The National Audit Office should review the way the FCA and PRA calculate their budget as a priority, to ensure all financial companies are getting good value for money.”
Hannant added that the FCA “needs to take into account the drop in the number of advisers caused by the introduction of the RDR when determining the amount it is asking of them. It is unsustainable to expect fewer advisers to carry this extra burden”.
The FCA attributes the increase to higher central support services costs, the increase in front line staff and IT, and an increase in costs ahead of the introduction of the consumer credit regulation team from April 2014.
It also highlighted the funding needs of newer undertakings such as the increased supervision of firms, such as mystery shopping.
AFR capital will also be channelled into key areas including alignment of consumer/firm interest, corporate governance and incentive structures in firms, tackling market abuse, the development of a competition department and the continued addressing of on-going misconduct issues.
The news has been already been met with derision from certain sources in the industry.