Financial Conduct Authority  

FCA: Every £1 spent on regulatory fees generates £11 benefits

FCA: Every £1 spent on regulatory fees generates £11 benefits

The Financial Conduct Authority has said for every pound spent on its operations, consumers and small businesses benefit by at least £11. 

In its impact statement published today, alongside its business plan (April 7), the regulator outlined the positive impact of its activities.

The FCA's annual funding requirement (AFR) is estimated to go up by £26.4mn in 2022/23, an increase of 4.3 per cent from £613.7mn in 2021/22 figure to £640.1mn. Advisers will have to fork out £86.5mn.

However, in its positive impact statement, the City watchdog said it is returning 11 times this amount.

Taking into account enforcement benefits and benefits created from new rules, it estimates to have generated a benefit of at least £6bn per year over the past three-year period (to March 2021). 

The FCA said this implies a benefit of at least £11 for every pound spent on running the FCA. 

Source: FCA Positive Impact 2022

What's more, the annual funding requirement comprises all of the work of the FCA, whereas its value for money analysis only concerns a fraction of FCA activity which refers to new handbook rules and enforcement cases. 

This means the "ratio of benefits from all FCA activities to AFR running costs will be much larger" than the estimates outlined, the regulator said.

The table by the FCA shows the benefits generated from rule making and enforcement and shows the value for money calculated by the regulator which it said captured the ratio of benefits to the FCA’s AFR.

Source: FCA Positive Impact 2022

To ensure that yearly fluctuations in the cost figure do not distort the picture, the FCA said it uses a three-year moving average for total costs. 

“On this basis, our average annual cost over the financial years 2018/19 to 2020/21 is £563mn. Over the 3 years to end-March 2021 we have estimated benefits from a subset of our new rules of at least £16.5bn. This is an annual average of at least £5.5bn.

 “Over the same period we have identified benefits due to our enforcement, resulting from direct consumer redress, as well as confiscations and penalties imposed, of nearly £1.4bn, an annual average of nearly £0.5bn.” 

The FCA said the outcomes paper will become a regular publication where it estimates annual positive impact on a rolling average over a three-year period.

Earlier today, the FCA also announced it would recruit 80 new people to crack down on problem firms and police the market. 

sonia.rach@ft.com

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