WIREDGOV

The Financial Services Authority (FSA) has yesterday announced proposals to simplify the structure of the fees it levies on regulated firms and to enhance fairness and transparency.

Following a review of its approach for determining the annual fees that firms pay, the FSA is consulting on a number of measures to ensure that fees continue to be set in a fair way, and to make the basis for calculating fees easier for firms to understand, including:

• Setting a standard 'minimum fee' that all firms will have to pay to cover the basic cost of being regulated;
• Ensuring that 'variable' fees over and above this basic minimum amount increase in direct relation to a firm’s size – with the result that fees for the largest firms reflect the greater regulatory engagement they receive.

By the end of November, the FSA will publish a Fees Calculator which will enable firms to assess what these proposals mean for them.

Mark Norris, the FSA’s chief operating officer, said:

"We are committed to delivering fair and transparent fees to all authorised firms.  This is particularly important given that we are funded entirely by the firms we regulate, so we need to ensure firms can clearly see how we calculate their contribution to the running costs of the FSA."

The FSA is inviting responses to the proposals in its consultation paper by 11 January 2010.  In February 2010, depending on the outcome of this consultation, the FSA plans to consult on fee levels for 2010/11 using this new fee model.

Notes for editors

1. The FSA is proposing to introduce a standard minimum fee that all firms will have to pay.  Based on 2009/10 costs, this minimum fee will be approximately £1000.  There would be one exception to this – the smaller credit unions will continue to pay a lower minimum fee (of either £160 or £540 depending on size), as they offer basic savings and loan facilities to their members.
2. The FSA’s consultation paper 'Regulatory fees and levies: Policy proposals for 2010/11' (CP09/26) was published today.
3. Firms pay fees to the FSA for being regulated, which are used to fund the FSA’s proposed budget, and programme of work, for the year ahead.  For fees purposes, firms are divided into categories (fee blocks) according to the type of business they do.  The FSA’s costs are then allocated to and recovered from firms on the basis of size, in terms of how much of that business they carry out.  Firms’ fees comprise two elements: a 'minimum fee' that all firms pay and a 'variable periodic fee' which is also paid by firms over a certain size.
4. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.