The City watchdog is proposing to increase its minimum fees by more than 90 per cent in the next year after they were frozen for two years to help protect the smallest firms from the impact of Covid-19.
According to the Financial Conduct Authority’s regulatory fee and levies proposals for 2022/23, published this morning (November 30), the minimum fee firms pay to be regulated will increase from £1,151 to £2,200.
This applies to the A fee-block, including advisers, which collectively account for 83 per cent (£510.9m) of the FCA’s annual funding requirement.
According to the regulator, the fee rise means the A block will contribute about £41.5m of the £50m of total fees, compared to the £21m currently raised.
The FCA said it wanted to spread to cost of regulation more evenly among firms - the minimum fee has been frozen at £1,151 since 2020/21 to protect the smallest firms during the pandemic.
It said: "Minimum fees ensure that all firms contribute towards the costs of regulating them.
"We said in our April 2021 consultation that small firms who only pay minimum fees should make a contribution that more fully reflects the costs associated with FCA authorisation and ongoing supervision."
Firms in this block include advisers, insurers, fund managers and claims management companies.
All firms pay a minimum fee, but the larger ones pay additional fees if they go over a certain earnings threshold.
About 37 per cent of firms in the A fee-blocks pay minimum fees only. The FCA explained: “In the fee-blocks which use income as a metric, the most common threshold is £100,000 of regulated income. So, for example, a financial intermediary in fee-block A.13 pays the A.0 minimum fee of £1,151 plus £2.443 per £1,000 on regulated income above the £100,000 threshold.”
Cost of regulation
But the regulator did acknowledge the challenges facing the financial services industry, especially due to the ever increasing Financial Services Compensation Scheme levy.
It said it was investing £100m in improving its technology so it can identify firms and individuals of concern earlier on and prevent them from entering the FSCS.
The FCA stated: “We recognise too that there is a high cost to firms, through levies under the Financial Services Compensation Scheme (FSCS), when their competitors fail.
“We are accordingly enhancing our scrutiny of applications for authorisation to reduce the possibility of unsuitable firms passing through the regulatory gateway. This includes recruiting more staff to strengthen our assessment of applications for approval by both firms and individuals.”
In addition, the FCA is looking to increase fees for consumer credit firms to bring them more in line with other fees.
Advisers saw the amount they contribute towards the City watchdog rise by 1.5 per cent in 2021-22, bringing the total paid by advisers, dealers and brokers to just over £82m.
amy.austin@ft.com
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