The Financial Conduct Authority (FCA) generated a £113.6m surplus for the 2021/22 financial year pushing its cash reserves above the maximum target, according to the regulator’s annual report.
This annual surplus included a £52.8m lower than planned expenditure from fees collected from the industry for ongoing regulatory activities (ORA).
As a result, the overall value of reserves held by the regulator reached £121.3m while its ORA reserves grew to £98.2m or 17% of ORA expenditure.
The FCA said it sought to maintain ORA reserves of between 6% and 10% of ORA expenditure, but this may be flexed based on the board’s assessment of risk and economic circumstances.
In this instance, the regulator highlighted that while ORA reserves have always fluctuated within the threshold it was more pronounced at present due to the spend profile of its projects.
It noted the current ORA reserves reflected the board’s “continued commitment to invest in the FCA’s technology and operations, underpinned by the transformation programme and our three-year strategy”.
“All fees raised through the annual funding requirement support our planned programme of work although timing of this spend does not always exactly match to the period in which fees are levied,” it said.
“2021/22 saw a lower cost mobilisation phase and providing the planning to achieve our strategic aims while the remainder of the spend will be seen through 2022/23.
“In addition, this ensures firms do not see high volatility in fees and the utilisation of ORA reserves over the three-year strategy, targeting towards the upper threshold limit of 10%.”
Alongside the reduced spend on regulatory activities, the FCA spent £29.7m less on staffing costs, £10.3m less by extending the life of systems or delaying go live dates on other projects, £6.2m less on IT costs and saved £10m in unused litigation fees.
However, there was a £3.4m overspend on professional fees, and a £2.4m increase in bad debt provision.