Confidence in the two new financial services regulators will be at risk unless more is done to attract and retain staff, the public spending watchdog has warned.
According to the National Audit Office (NAO), more than a third of staff at the Financial Conduct Authority (FCA) have less than two years’ service at the regulator and its predecessor, the Financial Services Authority (FSA).
And it noted that 26% of those who have resigned from the Prudential Regulation Authority (PRA) were classed as ’high-performers’. Staff turnover at the PRA stood at 11.7% last year, while the figure for the FCA was 9.7%.
The NAO said: “There is a risk that this may begin to undermine industry confidence in the regulators and poses a risk that knowledge within the organisation will be lost.”
Following last April’s break-up of the FSA, the PRA now undertakes prudential regulation of all banks, building societies, insurers and credit unions, while the FCA is responsible for conduct regulation.
The combined cost of the FCA and PRA is forecast to be £664 million in the current financial year, which is 24% higher than the FSA in 2012-13 due to additional front-line staff, IT expenses and support and premises costs.
The NAO said the costs should be seen in the context of the potential benefits from the regulators acting more effectively to reduce harm to consumers and limiting future taxpayer liabilities from financial crises.
It added that there was evidence that the new approach from the two bodies was encouraging earlier and more decisive regulatory intervention.
Amyas Morse, head of the National Audit Office, said: “These are still early days for the new regulators, and there are encouraging signs that their new approaches are gaining traction.
“Attracting and retaining the right staff are vital to keeping this progress on track, and so both regulators need to tackle this issue. In future, we will expect the FCA and PRA to demonstrate that their increased costs are achieving value for consumers and the taxpayer.”
The NAO said the two organisations have a combined headcount of 3,815 full-time posts.