The total annual cost of funding the new “twin peaks” regulatory system will be £646.3m, a 15 per cent increase over the cost of regulation in 2012/2013.
The annual funding requirement for the Financial Conduct Authority is £432.1m, and that of the Prudential Regulation Authority is £214.2m.
Speculation that the cost of regulation was set to rise sharply followed the news that the FCA would alone account for 80 per cent of the FSA’s budget.
According to the FCA, 42 per cent of authorised firms will continue paying the minimum £1,000 fee while medium sized firms will see an increase depending on the type of business they conduct.
The bulk of the increased funding will be picked up by larger firms, which the FCA says reflects the resources applied to intensive conduct and prudential supervision of firms which could have a more pronounced impact on the market.
Main reasons for the 15 per cent increase in the cost of regulation include increasing the number of front-line supervision staff, an increase in information technology costs and an increase in central support services costs.
Money from enforcement fines imposed by the Financial Services Authority in previous years will be paid to the Exchequer under the new system rather than being used to mitigate fees.
Martin Wheatley, chief executive of the FCA, said: “We are introducing new approaches to the way we do much of our work, becoming much more proactive and consumer focussed. Much of the increase in AFR is the result of the additional resources needed to ensure the FCA delivers on its new objectives, as well as the practical costs of implementing the new regulatory structure.
“The increases will be borne mainly by larger and more complex groups with medium sized firms seeing a proportionate increase. We have, however, minimised the impact on smaller firms by keeping the minimum fee at £1,000 for the third year running. The FCA recognises the difficult economic circumstances for many firms and is committed to keeping any essential cost increases to a minimum.”
