When financial markets turn nasty, banks cut jobs and financial regulators expand. It sounds right and, on the surface, it seems as though that is what has happened at the Financial Services Authority, Britain’s financial watchdog. According to the agency’s business plan for 2008-09, the FSA has pared back job cuts announced a year ago and sought additional space in Canary Wharf for its staff (perhaps taking advantage of the fact that neighbouring investment banks in London’s financial district are shrinking).
How does this fit with the regulator’s lean, mean, less-is-more philosophy? Pretty well, in fact. Last year, the FSA promised to cut staff numbers by 300 from 2,800 by March 2010, but pay more to those who remained to implement its principles-based regime. That programme remains on course. The agency’s staff numbers are now down to 2,740, but staff costs are projected to rise by more than 7 per cent in 2008-09.
If the FSA is handed additional powers in the wake of the run on Northern Rock, the stricken mortgage lender, it may be useful for the regulator to have this additional flexibility, but that’s not the main reason some jobs are being redeployed rather than being cut. The authority’s priorities have simply changed, with new initiatives sucking in staff. As for physical space, the story is similar: the authority is still reducing its office space, but not by quite as much as it originally intended. The cash-strapped banks and insurers that fund the agency can relax. Far from taking possession of lavishly appointed offices, the FSA’s officers are going to be moving to “flexible desking” — where there are fewer work-stations than staff.