At a time when financial services firms are not only under more scrutiny from the FSA but also require their regulator to be as effective and efficient as possible, the FSA’s level of performance has declined.

Earlier this month, the FSA published the latest set of performance results for service standards and customer satisfaction. The FSA’s 54 service standards were assessed for the period 1 October 2010 and 31 March 2011. Although no transactions took place in relation to one of the service standards, 63.3% of the standards were met and 37.7% were not.

Although the FSA has pointed out that a number of the service standards have ‘challenging’ 100% targets, this represented a decline in performance when compared to analysis conducted between April 2010 and September 2010.

The decline comes as little surprise. In August 2010, I reported that there had been a 128% increase in the number of FSA resignations in the second quarter of 2010 (in the wake of the government announcement sounding the death knell of the regulator in its current form), and predicted that such an exodus would put at risk the FSA’s ability to function. The FSA has noted that it has adopted a more intrusive approach during the period analysed and it has also suggested that it has had to deal with a high volume of very complex queries.

Of the 54 service standards 31 are standards imposed by statute or the FSA handbook. 11 of these statutory standards were not met.

Areas of particular concern for firms are the time taken for the FSA to process an application for Part IV permission or for approved person status. The FSA has fallen short of its statutory targets for both, although in both instances the regulator was required to reach a 100% target and only narrowly missed it. During the period analysed, 99% of completed applications for Part IV permission were processed within six months and 99.9% of applications for approved person status were processed within three months.

Data acquired by RPC as a result of a FoI request shows that there is a clear correlation between the increase in FSA resignations in the second quarter of 2010 and the time taken for the FSA to deal with applications for corporate FSA authorisation. In the year from April 2010 to March 2011 the average time taken to close an application for corporate authorisation was 24.9 weeks. In the previous year, the average time taken was 19.4 weeks. It appears that a combination of increased scrutiny of financial companies and a shortage of staff at the FSA means that applications for authorisation may take a month longer to close than they did a year ago.

Other areas of failure include the time taken for the FSA to respond to letters, faxes and emails (84.5% within 12 days rather than the target 90%) and the time taken to process Money Laundering registrations (96.4% within 45 days rather than the target 100%).

It remains to be seen if the FSA will have the resources (or the will) to address its decline in performance or whether, distracted by the reorganisation, it will get worse.