City watchdog lobbies for £40m rise despite Tory pledge to curb it

JUST days after announcing the departure of its chief executive, the Financial Services Authority (FSA) has said its budget needs to be increased by 10 per cent this year.

Britain's financial regulator – which faces the axe if the Conservatives win the coming general election – said the need for intensive supervision and ongoing regulatory and policy reform meant it needs 454.7 million this year, a 40.9m rise on last year.

Chief executive Hector Sants, who announced his resignation this week, said the way the FSA regulates, both in its approach and intensity, had changed radically.

"We recognise any increase in the industry's costs is unwelcome at a time when margins are under pressure in some segments of the industry," he said. "However, the overall increases are necessary to deliver our new intensive supervisory approach."

The FSA said a new fee structure would impose costs on firms which will be subject to greater scrutiny, with 60 per cent of the companies paying less.

The Tories have said that, if they win the election, responsibility for regulating the financial sector would be passed to the Bank of England.

City commentators – despite holding mixed views of the FSA's effectiveness – were sympathetic to the increased costs of an expanded role, despite the uncertainty.

Howard Wheeldon, of BGC Partners, said the future of the FSA was a separate issue to the immediate needs of the regulator.

"We don't know what the FSA's future is going to be, but we have to assume at the moment that it's going to be status quo, until and if there is a change of government," he said.

"They must, whatever the future may hold, be properly funded, bearing in mind the greater pressures being placed on them by the present administration."

Individual parts of the financial sector questioned why they faced increased fees if they had not caused the banking crisis.

Peter Vipond, director of financial regulation at the Association of British Insurers, said its members' fees to the FSA had nearly doubled in three years.

"It is difficult to see the justification of the FSA for these increases as insurers and insurance regulation has passed the test of the current crisis, with no UK insurer failing or needing government funds."

Andrew Strange, director of policy at the Association of Independent Financial Advisers, said its members were also being unfairly targeted, paying almost a fifth of the FSA's funds.

"This is not proportionate, as the intermediary sector does not present a systemic risk," he said.