FSB Funding

Gerry Anderson at the FSB provides some insights into the operations of the FSB, its funding, and other interesting stuff.

Readers will remember that we have been looking at service delivery and issues around profile changes. In terms funding of the FSB Anderson says that the ongoing operational costs of the FSB are financed primarily through levies and the board is empowered to raise such levies in terms of the provision of the Financial Services Board Act.

Anderson says that the FSB is a statutory body and a non-profit organisation and any over-collection of levies, besides making provision for three-month operational costs, as a reserve, is refunded to the levy payers.

The different line divisions of the FSB collect levies from the institutions that are regulated by them, such as retirement funds for the Registrar of Pension Funds, Insurance (both long and short-term) for the operational costs for the Registrar of Insurance. 

He did confirm that cross subsidisation of the sectors regulated by the FSB does not take place for understandable reasons.

As far as FAIS is concerned, for the current financial year - April 2006 to end March 2007, the total expenditure budget amounts to R50m, while the total income is estimated at R56m. 

So there appears to be some surplus. Not so. The FAIS line function has built up an accumulated deficit and Anderson says the intention is to reduce this over time. 

This deficit is attributable to the fact that FAIS expenditure costs commenced on 1 August 2002 with the creation of the FAIS department and the first levies could only be collected (from a small number of FSPs) in February 2005. 

As a result the FAIS costs were under funded for several years. Added to which the FAIS Ombud is financed by the FSB, and the 2005 / 2006 budget for the Office of the FAIS Ombud is R12m.

Editor's thoughts:
*  Over-collection of levies is an interesting concept, but then so to is the deficit that has to be worked off.