Tougher regulation doesn’t come cheap, the UK’s Financial Services Authority said today that the more aggressive regulatory regime it’s adopting is going to drive a 10% budget increase in the year ahead.

The FSA published its business plan Wednesday, setting out its priorities for 2010/2011, which it says will require greater policy and supervisory resources. As a result, the FSA will be recruiting an additional 460 staff in 2010, and will see its’ funding requirement rise by 9.9%, it said.

“Intensive supervision is inherently more confrontational. Our supervisors are making judgements both about the robustness of the business models of firms and the suitability of the products they are selling. We will then intervene promptly if we anticipate problems,” said FSA chief executive, Hector Sants.

“This proactive approach to supervision requires significantly more people than the old reactive model and those individuals must be of a higher quality and supported by more sophisticated systems. If society wants a more proactive approach it must accept that it will have a larger and more expensive regulator,” he added.

“The 9.9% increase in our annual funding requirement provides the FSA with the income that it needs to continue to deliver high quality monitoring of the financial services industry, along with international regulatory reform,” Sants said.

IE