Editor's Comment: Scrutinisers under the spotlight

Figures released by the National Audit Office show the combined forecast cost of the Financial Conduct Authority and the Prudential Regulation Authority as £664m in 2013-14 – 24% higher than the cost of the Financial Services Authority in 2012-13.

The regulators attribute this increase to additional front-line staff and costs arising from information technology, support and premises, and say it is more than offset by the potential benefits twin-peaks regulation will bring in limiting harm to consumers and taxpayers.

Encouraging signs were found showing changing approaches triggered earlier and more decisive regulatory intervention and that there is currently a good working-level relationship and communication between staff at both regulators. However, both authorities face challenges in ensuring they have the right range and depth of skills and in keeping costs down.

More than one-third of staff at the FCA have less than two years’ regulatory service, while 26% of those who have resigned from the PRA were classed as “high performers”.

Fears have been raised that this skills issue increases the risk that knowledge in the organisation is being lost and may begin to undermine industry confidence in the regulators – so attracting and retaining the right staff is vital to keeping this regime on track.

Meanwhile, anecdotally, relocating the PRA away from Canary Wharf and close to the Bank of England has cost an extra £1m. While the insurance industry itself continues to face cost-cutting exercises across the board, commentators have suggested the regulators could reduce costs by moving out of London and closer to their many regional members.

If it’s good enough for the BBC, maybe it’s good enough for the financial regulator – let’s just hope MPs don’t find the prospect of regulatory relocation packages similarly “difficult to justify”.

Wherever they end up, as Amyas Morse, head of the NAO, said: “In future, we will expect the FCA and PRA to demonstrate that their increased costs are achieving value for consumers and the taxpayer.”

Stephanie Denton, editor

This article was published in the 27 March edition of Post magazine.