AMI: FSA fees not acceptable
Commenting, Robert Sinclair, director of AMI, said: “In responding to the Banking crisis, the FSA appears to be laying the blame most closely at the door of mortgage intermediaries. We are struggling to identify the need for a 33% increase in costs for a sector that has shrunk to a fraction of its previous size. It was not the intermediary world that caused this crisis, but we appear to be picking up the tab.
“Well run, successful firms are facing significant increases in fees. Our current calculations indicate that, based on what firms were charged last year, a £500k turnover firm is looking at a 32% fee increase, whilst a £5 million turnover firm will see an 87% increase.
“The increase in FSA’s Annual Funding Requirement, of almost 10%, is seven times the current rate of inflation. This follows last year’s significant increase to cover the costs of the banking crisis. The intermediary sector now accounts for almost one fifth of the regulator’s overall funding requirement. This is not proportionate as the intermediary sector does not present the same risks as the Banking and Wholesale sectors. It is time for a root and branch review of the regulator’s costs which tackles the issue of who foots the bill. For this review to be successful and credible we would expect it to be conducted by the National Audit Office.
“Any review must consider the value for money of current regulation. It should be remembered that the Mortgage Code Compliance Board (MCCB) looked after around 10,000 firms and 38,000 registered sales staff at a cost of £4.4 million per annum. This cost is less than the increase in actual costs required by FSA to cover the same, but smaller, sector this year. The FSA has a cost budget this year of £15.6 million for the sector. In the MCCB’s 5 years of operation it issued 9,945 reports following visits to firms. We would welcome the delivery of similar statistics for FSA on its 5 years of regulation.
“Additionally, the move to a straight line recovery model for fees ignores the true risk profile of firms and with the network model in mortgages, will penalise severely a number of smaller firms who will suffer large increases due to the success of their parent organisation. There are more appropriate risk indicators than the size of the firm and the FSA needs to consider this further. Fees must take account of the sector the firm operates in, particularly those that operate strong compliance cultures, and the overall systemic risk that sector poses to the economy.”