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FCA Regulatory Fees and Levies - Rates: 2015/16

Response to the consultation

Q1: Do you have any comments on the proposed FCA 2015/16 minimum fees and variable periodic fee rates for authorised firms

We wish to express our continued support for the minimum fee structure for the smallest credit unions. The special minimum fees payable by small credit unions reflect the fact that they operate under the lowest interest rate cap of 3% per month and are often deeply involved in offering fair and affordable financial services to those unable to access such services elsewhere. As a sector operating within the tightest of margins in serving the financially excluded within the constraints of a uniquely-low interest cap and at a fraction of the scale of their competitors, small credit unions are the most impacted by regulatory costs which, if too high, might prevent them from fulfilling their valuable social role. We are appreciative that the FCA has continued to preserve the special minimum fee structure for small credit unions.

However, increasing minimum fees in line with the total annual funding requirement represents a dilution of the proportionate treatment that the special lower fees represent.  In contrast, the PRA has retained both their minimum and special minimum fees at current levels, citing their secondary competition objective. We would appreciate clarification on the policy going forward, as the FCA points out, had minimum fees increased each year they would be 46% more than they are now. We are concerned that annual increases of minimum fees in line with the annual funding requirement would burden significantly the minimum fee payers due to the regressive element of the flat minimum fee. For example, the increase for a £4 million firm will be over 10 times as great as the increase of a £1 billion firm in proportion to their modified eligible liabilities. Whilst we acknowledge the necessity of a minimum fee to ensure that all firms pay a reasonable amount towards their regulation and contribute to the core running costs of the FCA, we question the appropriateness of increasing the flat minimum fee in direct proportion to the increases in the annual funding requirements.

We strongly support the fee premium paid by the largest and most systemically important banks in the deposit-taking class. These firms receive much in the way of additional oversight and scrutiny from the regulator and pose the greatest risk of consumer detriment due to their scale therefore it is fair and proportionate that these firms continue to pay higher fees. In general we are largely satisfied with the FCA’s continued approach to the fee structure however we are concerned about how the increase of the minimum and special minimum fees has been calculated.

You can download the PDF version of the consultation response on the right hand side.