The FSA has published its Business Plan for 2010/11 which sets out its work programme and priorities for the coming year, as well as the implications for the FSA’s budget. There are few surprises, but some of the key points are summarised below.

1. There is a 9.9% increase in the FSA’s funding requirement and 460 additional members of staff will be hired before the end of 2010, largely to support supervisory activity and the implementation of Solvency II.
2. The FSA will continue to implement measures to support its credible deterrence strategy in support of its more intensive supervisory approach.
3. The business plan refers to a “more robust” approach to enforcement and more proactive identification and mitigation of retail conduct risks, the likelihood of higher penalties for large firms under the FSA’s new penalties framework and the FSA’s intention to impose further “significant” penalties in the retail sector to ensure that customers are treated fairly. This is consistent with the FSA’s existing strategy of credible deterrence.
4. On resolution and recovery plans, the FSA is currently undertaking a pilot exercise with a small number of banks. The evidence gathered from this exercise will be used to develop proposals for consultation in 2010/11.
5. The FSA is undertaking a thematic review on the collateral practices for traded products (OTC derivatives, repurchase agreements and securities lending) to assess how firms are addressing risk in this area. The FSA expects to issue a report on this work in Q2 2010.
6. The FSA is piloting the re-introduction of client money reporting and plans to consult on this in 2010/11.
7. Market confidence – there will be a continued focus on enforcing the market abuse regime and, in the FSA’s words, it will continue to “aggressively pursue” prosecutions as well as regulatory enforcement. The FSA will publish further guidance on best practice systems and controls to prevent market abuse during the year.
8. Areas of focus in the retail sector to protect consumers – as indicated previously, the FSA will focus on the mortgage market, the retail distribution process, payment protection insurance, the use of unfair contract terms and disrupting unauthorised activity, such as boiler room scams. Also, the FSA wishes to ensure effective redress and/or enforcement action if there is actual consumer detriment. The FSA will publish a consultation paper in late 2010.
9. The FSA expresses a willingness to intervene earlier in the development of a retail product based on the FSA’s assessment of a firm’s business models and competence of management, pursuant to an outcomes-focussed more intensive supervisory approach.
10. Financial crime – the FSA will focus on
    • (i) market abuse/insider dealing;
    • (ii) systems to prevent bribery/corruption,
    • (iii) systems to prevent money laundering, and
    • (iv) mortgage fraud.
11. The FSA will extend its review of anti-bribery controls from commercial insurers to investment banks.

Commenting on regulation within Europe, Hector Sants, FSA Chief Executive Officer, stated that the FSA will increasingly become a European supervisory arm of a centralised European policy decision-making process. Mr Sants expressed the FSA’s support for this policy approach as long as the value of locally-delivered supervision with sufficient situation specific autonomy is retained.

Copies of the Business Plan 2010/11; and related press release are available.

http://www.fsa.gov.uk/pubs/plan/pb2010_11.pdf

http://www.fsa.gov.uk/pages/library/communication/pr/2010/048.shtml