FSA Unveils 2007/08 Business Plan

by Robin Pilgrim, LawAndTax-News.com, London

07 February 2007

The UK's Financial Services Authority (FSA) on Tuesday published its Business Plan for 2007/8, which sets out its priorities for the coming year. The plan focuses on the organisation's move towards more principles-based regulation (MPBR).

The document also outlines increased spending on financial capability and key investments to be made in people, information systems and the way the FSA regulates, to facilitate the change towards MPBR.

The FSA's Chief Executive John Tiner explained that:

"More principles-based regulation will produce significant benefits for firms, markets and consumers but we need to invest in our people and information systems to realise this change. This will result in an FSA that is better equipped to face future challenges and to deliver better outcomes for all our stakeholders."

"In the year ahead we are also placing increased emphasis on and investment in our National Strategy for Financial Capability. Lack of financial understanding among consumers has been recognised as a priority risk by the FSA and the need for more confident, capable consumers who can take advantage of a more dynamic market place has never been greater. We have set out our targets: we need this additional investment to achieve them."

The Business Plan explained that the main priorities forthe FSA's wholesale division in 2007/8 are implementing and influencing EU legislation such as MiFID and Solvency 2, and increasing focus on the prevention, detection and prosecution of market abuse and other forms of financial crime.

The FSA's retail work centres on making the market more effective, and the main priorities in this area will continue to be the Treating Customers Fairly (TCF) initiative, Financial Capability, the review of retail distribution and payment protection insurance.

New initiatives are limited, and include work on the impact of climate change on the financial services markets, an assessment of how older consumers are served by the financial services market, and a review of the risks within the commodities markets.

The 2007/8 budget shows an overall increase of 10.1%, resulting in an increase in the Annual Funding Requirement (the amount raised from firms) of 9.5%.

The major components of this increase are a GBP7.4 million increase in spending on financial capability, taking the total expenditure in 2007/8 to GBP17.1 million, and an up-front GBP11.3 million spend on IT operations which forms part of a multi-year cost efficient outsourcing agreement.

In addition the Board has approved a budget of up to GBP50 million over the next three years to improve the effectiveness of FSA staff and support the move to more principles based regulation.

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