Britain's financial services watchdog has had to boost bonus payments to retain employees in the face of fierce competition for staff from the banks and brokerages it regulates, its annual report revealed on June 27.
The Financial Services Authority's (FSA) annual report for 2005/2006 showed its employment costs were 12.1 million pounds ($22.1 million) more than its original staff budget for the year of 196.4 million.
The watchdog said 7.6 million pounds of the increase was due to its decision to make retention payments in certain areas.
It increased staff bonuses from a budgeted level of 7 percent to 12 percent "in order to respond to an increasingly competitive employment market in financial services."
The job market in the City of London's financial centre has tightened up over the past year as investment banks have added staff to cope with a boom in mergers and stock market activity.
The regulator's job is to police the UK's financial services sector, which includes retail financial services as well as investment banks and brokerages.
But the financial services industry has been complaining loudly about the increasing burden of regulation from the FSA and also from international and European regulatory bodies.
Chief Executive John Tiner said in the report the watchdog had commissioned a study of the costs of regulation in corporate finance, institutional asset management and investment and pensions advice.
He said the results of the study would help update the FSA's "Better Regulation Action Plan," which he said would be published in the near future.
The regulator has also faced criticism for its approach to enforcement after a tribunal criticised its handling of a pensions case against insurer Legal & General.