City regulator takes on 460 staff

In its business plan for 2010/11, the Financial Services Authority (FSA) vowed to become increasingly confrontational with the industry as it unveiled plans to increase staff by 14 per cent.

"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," outgoing chief executive Hector Sants said.

"If society wants a more proactive approach, it must accept that it will have a larger and more expensive regulator."

The FSA has been on a recruitment drive for about the past 18 months to help its quest to improve banking practices.

It said more new staff were needed to help meet EU Solvency II rules designed to ensure insurers have enough capital to cover their risks.

Industry experts said the FSA had "drawn a line in the sand" after its former light-touch or principles-based approach was blamed for failing to halt a financial crisis that spawned a global recession.

"Sants has stated that the FSA will 'take a view' that may well be disputed by firms and which may in some cases prove to be wrong," noted Tim Dolan, a partner at law firm Pinsent Masons' financial services team and formerly a member of the FSA's enforcement division.

"Sants has also stated that the FSA is prepared to be more 'confrontational and risky'," he said, adding that the increased headcount was a "massive increase in resource" and that regulated companies should prepare for a more demanding FSA.

Bankers have questioned the regulator's authority and expertise as it takes an increasingly tough stance with the industry and bulks up its clout with experts ranging from criminal lawyers to London business grandees.