GFSC’s staff turnover rate ‘too high for comfort’
RETAINING skilled and dedicated staff has reached ‘breaking point’, the Guernsey Financial Services Commission has warned as it has set out the impact of ‘regulatory inflation’.
‘While it was helpful to be able to increase our fees by inflation (2.1%) for 2021 this followed two years in which fees were frozen while our costs increased. Over the past eight years we have kept our cost increases to 2.4% pa on average while our fees increased by an average of just 1.2% pa,’ said the regulator.
‘The fact that we have run only a small deficit for the last two years is reflective of the fact that we have been utilising our reserves, capitalising much of our technology spend, maintaining our current staff level with strict salary controls which included being unable to offer our staff a pay rise in 2021.’
The commission experienced a staff turnover rate of 18.5% in 2020, described as ‘too high for comfort’. In the first half of 2021, staff attrition had remained ‘comfortably high’.
‘As a regulator we do not seek to match the salaries paid by industry (nor should we) but we need to be able to recruit and retain staff. While we have done this so far by bringing in a range of non-cash benefits, such as a ‘nine-day fortnight’ initiative, this can only go so far and we have reached the breaking point for retaining our skilled and dedicated staff.’
Legal costs resulting from challenges to the commission’s enforcement action were also highlighted, although these had been offset by some extent by fines and penalties levied. Changes to fining powers, applicable to cases since 2017, should also help apply a ‘user pays’ principle to enforcement action.
But after eight years of ‘considerable financial restraint’, the commission said cost pressures meant fees needed to increase by a significant amount to ensure it remained a ‘fit for purpose’ international regulator.
The additional income provided by the fee increase would be invested in ‘slightly increasing’ staffing numbers in key areas, such as authorisation and supervision. It also would be used in continuing to improve internal systems to ensure the GFSC was a more efficient and effective regulator.
Looking at a ‘cash neutral position’ at the end of three years, the GFSC said: ‘Based upon internal modelling of the absolute minimum level of resourcing needed for the commission to meet its international regulatory obligations having regard, in particular, to minimum staff numbers and effective regulatory systems, the commission is seeking an overall fee increase for licensed or regulated entities of 10.1%.’
The GFSC also noted regulators in other jurisdictions had or were increasing fees substantially. The Jersey Financial Services Commission had raised its fees by up to 20.5% in 2020-21 while the Isle of Man regulator was increasing fees across all sectors by 20% with another 20% increase proposed for 2022-23, said the GFSC.
