FSA Announces Fee Increase and 280 New Jobs to Usher in Post-Crosby Future

The Financial Services Authority, the regulatory body for the financial services industry, is to get bigger and more blinging amid a climate of greater scrutiny into the activities of the City. After James Crosby’s resignation from the body, it appears the apparently circuitous discussion about the FSA on Tuesday is actually turning into real-world results. 

The FSA is to raise the amount it collects in fees from the various companies it regulates by £117m, a 36.5% increase. This will enable it, as the FT says in rather bombastic language, “to develop a more intrusive, judgement-based form of oversight”, which will be a nice change from the apparently arms-length, try-not-to-overleverage-yourself-oh-you-have-well-never-mind-based form of oversight it’s been using for the last few years.

The extra money will fund a 280-strong hiring drive, as well as an increase in the pay for the top positions. As Goodwin et al said on Tuesday, the culture for massive remuneration is created in part by wanting to attract the best, with money being the most attractive thing of all; despite the inevitable crowing from the press, the FSA is being pragmatic and knows it won’t get the quality it needs just by flagging up how wonderful and responsible a body it is – there needs to be some heavy cash involved. Is the FSA sexy enough for the real high-flyers though? Hmm.

There’s already a backlash coming from smaller financial advisory firms, who are saying that they’re having to pay for bankers’ mistakes. Chris Cummings, the head of the Association of Independent Financial Advisors, said the proposals “endanger the survival of good firms”, alleging that fees could rise by 90% at some medium-sized firms; the FSA for their part say that 10,000 small firms will see their fees reduced. 

For any other company that was in the eye of a scandal, announcing increased spending would be a PR nightmare. But it’s the best thing the FSA could have done – it announces their dedication to making sure the financial world is nurtured back to health. Expect a lot of unemployed investment bankers to be getting off the sofa and polishing their CVs this morning, presumably Tippex-ing out the years at Lehman’s mortgage division…

Posted by Ben Beaumont-Thomas in Hot Money | February 13, 2009 11:16AM |