Implementing Solvency II rules and making a smooth move to the twin peaks regulatory model will be among the top priorities for the Financial Services Authority in 2012/13.
The regulator today published what is almost certain to be its final business plan before it splits into the Prudential Regulation Authority (PRA) and the Financial Conduct Authority in 2013.
Its main focus over the coming year will be on five areas:
- Delivering the regulatory reform programme;
- Continuing to influence the international and European policy agenda;
- Delivering financial stability through its supervision of firms during a period of continued market fragility;
- Delivering market confident and credible deterrence;
- And, delivering on the main FSA initiatives to improve consumer protection.
Next month sees the FSA move to the 'twin peaks' model internally in preparation for the formal change scheduled for next year. This means financial services companies will have two groups of supervisors - one for prudential matters and one focusing on conduct. The conduct 'peak' will also supervise firms which are not dual-regulated.
Among the key ongoing prudential policy initiatives the FSA will implement are Solvency II, the Capital Requirements Directive IV and the recommendations of the Independent Commission on Banking.
Hector Sants, the chief executive of the FSA, said: 'The year to April 2013 will be the last year for the FSA before it splits into the PRA and FCA. We will nevertheless ensure we continue to deliver effective supervision and to support the development of the key European policy initiatives.
'From 2 April 2012 we will have moved to a twin peaks model within the FSA so an additional key element must be to ensure that we thoughtfully refine this model prior to the legal launch of the new regulatory structure and ensure that the benefits of the reforms we have made since the financial crisis are carried over to the new authorities.'
Sants, who last week announced he will leave his current post in June, noted that the FSA budget for 2012/13 was £578.6m - a 15.6% increase on the previous year.
'The FSA recognises that given the economic circumstances the industry faces, it is not realistic that the cost of regulation continues to rise at this rate in the long term, and therefore the new authorities will be very focused on controlling costs.'
He noted, however, that increases in the FSA's cost over the past four years had largely been funded by large, not small, firms. Small firms had also seen their contribution to the FSA as a percentage of their income fall, on average, he added.