FSA Outlines Priorities For 2006-07

by Robin Pilgrim, LawAndTax-News.com, London

02 February 2006

The UK's Financial Services Authority on Wednesday published its Business Plan for 2006/07, setting out its priorities for the year ahead and its planned budget to achieve those objectives.

The financial services regulator revealed that its priorities for the coming year are to:

• Perform firm and market supervision broadly in line with its current risk appetite.
• Begin or complete priority thematic work - where the FSA studies a particular sector or aspect of the regulated market - targeted on the basis of risk. Recent examples of thematic work include: inquiries into sales of Payment Protection Insurance and subsequent follow-up work, including enforcement investigations, with individual firms; the review of the handling of client money within general insurance brokers; and the study carried out during the first half of 2005 into current market practice on the identification and management of conflicts of interest.
• Implement the Markets in Financial Instruments Directive (MiFID) and Capital Requirements Directive to a high standard; continue its international leadership on Solvency 2 and at the international level more generally.
• Begin new enforcement cases as well as putting in place the remaining recommendations from the Strachan review of enforcement processes, published last July.
• Continue its leadership role on financial capability, driving forward in particular work in the areas of schools, higher education, young people not in education, employment or training and the workplace. It will also make further improvements to the information and services it provides to consumers.
• Strengthen its analytical research and understanding of key sectors - trends, competition drivers, supply chains, market structures - to better inform its regulation.
• Maintain effective management and oversight of finance, risk, resource allocation, legal issues and internal controls.
• Make improvements to its information systems infrastructure and functionality.
• Significantly improve performance against its service standards.
• Accelerate the change necessary to deliver its better regulation agenda, as set out in the Better Regulation Action Plan in December 2005, including raising further the quality and training of its people.
  

The FSA's chief executive, John Tiner, explained that:

"Much of our work in 2006/07 will be a continuation of projects or themes already in process. We will both continue to improve our risk based approach to regulation and firm supervision and take forward our commitment to deliver a more effective regulatory regime by changing the balance significantly towards a more principles-based approach. I believe that this twin approach is right for the UK financial services industry and its customers and for delivering better regulation."

"While much of our policy work continues to be driven by initiatives at an EU and international level, we have wide discretion over much of what we do day-to-day. So we continue to be alert to market developments and we identify in this Business Plan a small number of new themes. While this plan represents our best judgement on what we currently see as priorities, we will not hesitate to reposition our resources in the event that a major new issue emerges during the year."

The budget for 2006/07 will be GBP276.1m, an increase of 3.25% on the previous year's budget of GBP267.4m. This will include GBP2m to fund improvements to the enforcement process recommended by the Strachan Review and funding for an overall 4.5% increase in staff pay. This is required to provide the necessary flexibility to respond to the pay pressures in some sectors. To meet the budget, the FSA will need to improve productivity by GBP7m.

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