The chief executive of the Financial Conduct Authority has said the levy towards the Financial Ombudsman Service will probably increase because of its plans to allow small businesses to use the service.
Speaking to the Treasury Select Committee yesterday afternoon (7 February), Andrew Bailey was questioned about the regulator's plans to extend the Fos in a bid to improve the way the financial sector handles complaints from SMEs.
During the course of the hearing Mr Bailey was asked by Labour MP John Mann whether government spending would have to increase to fund the ombudsman's new obligations.
Mr Bailey said: "It is not paid for by government it is paid for by a levy. You don't get the money from government."
Responding to this, Mr Mann asked: "So the levy would have to increase?"
Mr Bailey replied: "Yes. We have a responsibility in respect of that."
The FCA chief later emphasised increasing the levy is how the regulator would fund the additional decisions the ombudsman would have to issue.
The extension of the Fos's remit follows the case of the treatment of SMEs by Royal Bank of Scotland, which was accused of artificially distressing otherwise viable businesses and through its actions put them on a journey towards administration, receivership and liquidation.
Mr Bailey told the committee he would also be supportive of a tribunal system and of a series of standards backed up with "teeth" through the senior managers regime, a new set of rules currently in place for banks and soon to be in place for advisers, which forces bosses to take more responsibility for problems at their companies.
He said: "You can get a greater degree of flexibility of approach by using industry standards, they can be adapted more easily, but frankly my experience is that unless they have teeth they are not going to do the job."
But he said the FCA would not lend its support to "any old standard".
Mr Bailey was also warned that the full FCA report into RBS's treatment of small businesses, which has so far only been published in summary form, had been leaked to an MP and was likely to make its way into the public domain.
Last week the FCA said it would publish the full report after RBS said it no longer had any objections to this happening.
Mr Bailey said: "I agree that we have got to do this quickly. If we do it under our powers we have legal obligations and frankly if we abuse those we can have action taken against us for that.
"I have to say that if somebody publishes it outside that framework we will have to look at that from the point of view of our own legal position."
He said he would "very much prefer" that the committee was not put in a position where it felt it needed to use parliamentary privilege to have the report released but he added that he would "do it as quickly as you can".