The study, which is a priority for the FSA in 2005/06, was set out in the regulator's latest Business Plan, published in January.
The study will be conducted in partnership with the independent Financial Services Practitioner Panel. It will pay particular attention to the impact of costs on small firms and on wholesale firms operating in internationally competitive markets. Its purpose will be to:
- Provide robust estimates of the costs to firms of regulation that stems from the Financial Services and Markets Act 2000 (FSMA). This will help to identify where there may be discretionary elements of regulation that are costly to firms but which are not matched by corresponding benefits.
- Analyse the impact of regulation on firms' operating costs and how far these costs go over that which firms would spend anyway as part of day-to-day operation.
- Identify, wherever practically possible, the extent to which FSMA regulation affects the prices that firms charge, the volumes, quality and variety of products or services that firms offer and firms' ability to remain innovative and competitive.
Kari Hale, Director of Finance, Strategy and Risk at the FSA, said: "It is a priority for the FSA to develop a deeper understanding of the impact of the costs of regulation on firms, especially smaller firms, and ensure that these costs are justified by the benefits. If the study highlights areas of regulation that are expensive but offer little benefit to firms, consumers or the markets, we will look for ways of easing the burden on firms."
Improving business capability and effectiveness, with a particular focus on small firms which now account for around 97% of the firms regulated, continues to be one of three principal objectives for the FSA. Progress has already been made to make it easier for small firms to do business with the FSA, including:
- Regional visits, with surgeries, to enable firms to discuss topical issues with the FSA
Industry training sessions designed and delivered by the FSA staff across the UK to help improve firms' understanding of its requirements
- Tailored handbooks for mortgage and general insurance intermediaries containing rules only relevant to these firms
- 'Firms Online' service on the FSA website to allow electronic submission of forms
- A single invoice showing all regulatory costs in one place
