Minimising the cost of FSA supervision

Abstract

This paper sets out some of the issues facing a firm in attempting to reduce the costs of compliance and concentrates on the operations performed by a firm's supervision teams and their interaction with the supervisors from the Financial Services Authority (FSA). It concentrates on those areas in which evidence suggests that the greatest opportunities for gain exist or where in fact firms permit the most significant inefficiencies to remain. The developments within compliance have been considerable over the last few years and while standards have risen so have the costs associated with demonstrating compliance with the relevant requirements. Firms must ensure that their supervision departments are operating efficiently and this means a return to basics. The compliance plan is an essential requirement but must be monitored and reviewed in order to ensure that targets are being achieved and resources concentrated upon the higher areas of risk. The greatest potential for additional cost has its origins in the visits undertaken by the inspectors from the FSA. Without careful planning, adequate resourcing and presentation of material it is very easy for the FSA to misconstrue the extent of a particular issue, or misunderstand the context in which the issue exists within the business. The opportunity for minimising additional costs arising from a routine visit from the FSA lies in the hands of the firm but many seemingly miss the warning signs. When things go wrong, firms often feel that they are at the mercy of the FSA. In fact there are a number of steps that a firm can take to either minimise the potential for escalation of an issue and to mitigate the costs even if a transfer to enforcement actually materialises.

Citation

Turner, R. (1999), "Minimising the cost of FSA supervision", Journal of Financial Regulation and Compliance, Vol. 7 No. 4, pp. 353-360. https://doi.org/10.1108/eb025022