The UK Bank of England is to charge banks and insurers higher fees. A wave of new regulations change the amount they must pay for supervision.
REGULATION FEES: The largest banks and insurance companies must now pay a bigger annual fee.
The fee is set at more than one quarter of a million British pounds paid to the BoE Prudential Regulation Authority.
The fees are for ensuring the safety and soundness of the companies. They stated that this is an increase of 4% on the fiscal year 2014.
The PRA needs extra revenue to fund extra work required to materialise a new set of rules.
The new regulations include a facility which holds leaders to account for their individual failures. It also pays for preparing insurers for European Union rules which came into force this year called Solvency II.
The BoE also commented that the funding increase: "reflects the budget for the current regulatory activities. It helps the recovery of transition costs and emphasizes the need for additional resources. These relate most to the advanced functions of PRA and implementation of new policy initiatives."
In the 2015 Budget, Chancellor George Osborne announced the increase is the latest hit on the banks. It saw a tax increase from 0.156 to 0.21%. This extra levy is therefore expected to raise an additional 900 million pounds a year.
Generally, the banks complained that the cost of the new regulation that they must hold, increased their capital. Yes, it must secure risky assets and misconduct penalties (often hundreds of millions of pounds). But, it will weigh heavily on their profits.
Banks must pay 'separately' to finance the PRA working on a project to its retail deposits. This gets based on an hourly rate for PRA personnel. That may be as much as 170 pounds - calculated according to a published consultation paper and the BoE. The paper shows Solvency II is costing €13.4 million this year alone.
The extra money goes toward recouping the BoE £74m spent establishing the PRA. It got created when the old Financial Services Authority split into two in 2013.
The other UK regulator, the Financial Conduct Authority, gets funded by a levy on the regulated organizations. Its annual demand is £446m spread over 70,000 companies. Some £8m will get returned to the banking and insurance sectors by the PRA.
As a footnote, the Prudential Regulation Authority levied its first enforcement fine. They penalised the taxpayer-controlled institution the Royal Bank of Scotland. The fine was £14m for IT failures.
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Banks and Insurers Pay Higher Regulation Fees in the United Kingdom