The Financial Conduct Authority (FCA) has revealed the escalating cost of Brexit it faces, as it prioritises its role in preparations for the UK's departure from the European Union, amid a "challenging year" for the regulator.
In its business plan for 2018/2019, published today (9 April), the FCA said it has carved out an additional £16m from its budget to fund its Brexit work alongside its normal responsibilities, bringing the total spend to £30m and leaving regulated firms with a £6m bill.
The regulator said: "The UK's decision to leave the EU has, and will continue to have, a substantial impact on the way we work.
"A significant proportion of our resources are already focused on the forthcoming exit, including arrangements to implement the change.
"To fulfill our regulatory objectives and provide technical support to the government in the run up to withdrawal, we have increased the level of resource dedicated to co-ordinating and managing this work.
"The additional cost of our EU withdrawal work outside our redeployed resources is £16m."
The FCA's budget has increased by 3.8% from 2017/2018 to £527m, and despite its budget of £2.5m for Brexit preparations doubling, this was not considered sufficient by the regulator.
It said £14m of the £30m figure will come directly from its budget, while £5m will come from reserves, £6m will come from regulated firms and £5m will come from its ordinary budgetary funding.
It explained: "Although our Annual Funding Requirement has increased by £5m to cover EU withdrawal work, we have still made difficult and challenging decisions about our priority activities across all business areas that are not related to work on EU withdrawal.
"We recognise the particular significance of EU withdrawal on wholesale financial markets, investment management and the general insurance sectors, and our decisions have been driven by our recognition of the capacity of industry to absorb change.
"We expect our work on the implications of EU Withdrawal will continue beyond March 2019, throughout any implementation period.
"We will keep our EU withdrawal priorities and resources under review as we gain greater certainty on the outcome of negotiations and the implementation timeframe."
Specifically, the FCA said its priorities with regard to Brexit will be to provide technical guidance to the government for Brexit and trade negotiations, and provide technical advice on new legislation.
It will also assess the impact of the recently agreed transition deal, and advise the Treasury and other areas of the government on how the UK's future relationship with the EU may affect the financial services industry and its users.
The FCA will also continue to liaise closely with the Bank of England in its work on areas of joint responsibility and dual-regulated firms.
Chair of the FCA Charles Randell, who has recently taken on the role from John Griffith-Jones, said: "This year is a challenging one for the regulator.
"To achieve our priorities, as well as plan for EU Withdrawal, while continuing to deliver our core regulatory activities effectively, will require us to use our resources efficiently and flexibly.
"I know we will also be looking hard at how we can be an even more accountable and transparent regulator, as we continue to explain to all our stakeholders why and how we make our decisions."
Chief executive of the FCA Andrew Bailey added: "The priorities in this year's Business Plan reflect the high level of resource we need to dedicate to EU Withdrawal, given its impact both on our regulation and on the firms we regulate.
"This inevitably affects the amount of work we can undertake in other areas.
"As a result, agreeing our 2018/19 priorities has involved particularly rigorous scrutiny and challenge."
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