In June last year the Economic Secretary, Ed Balls, announced a review into the efficiency of the FSA. On the 30 April 2007 the National Audit Office (“NAO”) published its review into the economy, efficiency and effectiveness of the FSA. The terms of reference for the review included:
- Performance management;
- Influencing and representation internationally;
- Working with other regulators;
- Financial crime; and
- Financial capability.
The NAO’s findings in respect of the terms of reference can be summarised as including the following:
- The FSA’s performance management system and tools have improved considerably but the FSA acknowledges further streamlining is required. In particular the NAO noted that the number of measures the FSA intends to use to measure its performance are too large. The FSA will reduce the number of measures for the next outcome performance report from 111 to about 95;
- Although the NAO was positive about the FSA’s approach to working in the EU, it found that the FSA needs to do more to explain its strategy and responsibilities in this area;
- The NAO praised the FSA for joint working relationships with other UK regulators. They singled out the Office of Fair Trading as the FSA’s main priority for future joint working. The FSA also wishes to have strong engagement with the Financial Reporting Council and the Pensions Regulator;
- The NAO found that the FSA spent just under 10% of its overall resources on work related to financial crime. The NAO recommended that the FSA should give greater weight to the financial crime risk in its regulation of small firms;
- The NAO recommended that the FSA should quantify the costs to society and the financial services industry of low levels of financial capability in order to assist the FSA in better allocation of its resources.
Although the NAO commended the FSA for managing the merger of 11 former regulatory bodies and creating the world’s first unified financial services regulator, the head of the NAO Sir John Bourn commented:
“…the challenge for the FSA is now to move to the next level. It must do more to demonstrate its impact; to get a clearer understanding of how much its different activities cost;… to streamline its processes and advice, to benefit industry and consumer”.