The Panel acknowledges the improving picture in terms of the FSA's overall relationship with the industry, the efficiency of its administration and the openness with which it conducts business. The report also acknowledges the reduction that there has been in the number of Consultation Papers and the various steps taken to make the FSA easier to do business with, including improving accessibility to the regulatory Handbook.
John Tiner, FSA chief executive, said: "As with all such reports, there are some comments with which we agree and others on which we beg to differ. But, as usual, we will work constructively with the industry to examine its concerns.
"One area of clear agreement is the need to focus in a serious way on the cost of compliance. This report presents a perception of cost rather than a detailed analysis. But, like the Practitioner Panel, we take the question of the costs of regulation, particularly for small firms, very seriously. In recognition of that, we announced two weeks ago that one of our priorities in the coming year will be a thorough study into the costs of our regulation, with particular regard to the position of smaller firms. We believe that there may be scope to reduce their burden. I am very pleased that the Panel has agreed to work in partnership with us on this important project.
"We do not accept, however, that the FSA is disproportionately focused on consumer protection to the detriment of our other objectives. We are absolutely clear that we pursue consumer protection in conjunction with our other objectives of maintaining market confidence, raising consumer awareness and helping to reduce financial crime.
"A huge influence on our work is the requirement on us to implement the many European Directives which have come from the European Financial Services Action Plan. Where we sensibly can, we use this as an opportunity to reduce our existing rules, as is the case with the MIFID. And in terms of implementation, our position is very clear: our rules will be super-equivalent - that is, going beyond the requirements of a Directive - only where this is necessary to maintain the standards that we, the industry and its customers expect of one of the world's pre-eminent financial centres."
During the year, the majority of staff recruited by the FSA joined from regulated firms. In addition, the regulator continues to hire senior practitioners from the industry as "grey panthers" to share their knowledge and expertise with regulatory staff. At any one time there are around 100 staff either on secondment to the FSA from firms, or vice-versa, and around 10% of staff studying for additional industry or professional qualifications. Overall, the FSA spends around £3 million on training to ensure that all staff have the skills and knowledge to understand and work constructively with the sectors and firms that they regulate.
In April of this year the FSA restructured itself to reflect better the nature of the firms and markets it regulates and to shift emphasis from policy development to effective policy implementation. While this is acknowledged in the report, the survey was conducted very shortly after these changes were made and consequently the impact of these changes would not have been evident to the industry at that stage. The next survey will provide a better measure.