The Financial Services Authority (FSA) has published a policy statement confirming its regulatory fees and levies for 2012/13.
On 2 February 2012 the FSA launched a consultation (CP12/3) on its proposed fees, which cover its Annual Funding Requirement (AFR). Following that process and finalisation of its annual accounts, the FSA has reduced the amount firms will be required to pay.
The overall AFR has been reduced by £18.6m (3.2%) from the proposed figure of £578.4m to £559.8m. This compares to £500.5m for the 2011/12 year, which now represents an increase in annual funding of 11.9%, compared to the 15.6% increase proposed in the original consultation. This reduction will flow through evenly to all fee-payers, except for those that only pay the minimum regulatory fee.
The reduction has been achieved by internal cost controls which reduced potential IT spend and the return of contingency monies set aside for use only in event that the FSA needed to deploy extra resources to deal with extreme macro-economic and regulatory events.
In addition, the Financial Penalties Discount (FPD) has also increased. Financial penalties received for 2011/12 totalled £70.7m, compared to an estimated £58.7m. The enforcement fines the FSA imposes during the previous year are returned to the industry by way of discounts to the AFR in the following year. Therefore, the actual amount invoiced will be £489.1m.
The FSA recognises the difficult economic circumstances for many firms and is committed to keeping any essential cost increases to a minimum. Fees are determined on the basis of activity based costing. In consequence the overall increase in fees will be borne mainly by larger firms, reflecting the resources applied to the intensive supervision of high impact firms. For instance, for their core business such as deposit taking and investment banking activities large banks will pay on average £20m, general insurers will pay on average £2.4m for their general insurance activities and life insurers will pay on average £5.0m for their life insurance activities.
Medium sized firms will see a proportionate increase reflecting the type of business they conduct. Currently 42% of the FSA’s authorised firms need only pay the FSA minimum fee and for the third year running the gross minimum fee for firms will remain unchanged at £1,000.
