FSCA budget and levies 2026/27 – What FSPs need to know
The Financial Sector Conduct Authority (FSCA) has published its proposed budget, estimates of expenditure, and levies and fees for the 2026/27 financial year, inviting public comment as required by the Financial Sector Regulation Act, 2017 (FSR Act). These proposals are of particular importance to Financial Services Providers (FSPs) and other financial institutions, who are directly affected by the levies that fund the FSCA’s operations.
The FSCA’s mandate and funding model
The FSCA’s mandate is to enhance the efficiency and integrity of South Africa’s financial markets, promote fair customer treatment, provide financial education, and support financial stability. To fulfil this mandate, the FSCA is primarily funded by levies imposed on supervised entities, including FSPs, as well as certain fees for specific services. The Levies Act and the FSR Act together regulate how these levies are calculated and imposed.
For the 2026/27 financial year, the FSCA is budgeting for gross revenue of R1.231 billion, with levies accounting for 94% of this amount. The remaining revenue comes from fees (3%) and other sources. The FSCA’s operational expenditure is budgeted at R1.230 billion, resulting in a modest surplus. Staff expenses, as is typical for a regulatory body, are the main cost driver, representing 65% of total expenditure.
Proposed changes to levies for FSPs
The FSCA proposes to increase the levy variables by 4% for 2026/27, which is slightly below the average Consumer Price Index (CPI) increase of 4.4% for 2024. This decision reflects an attempt to balance the FSCA’s funding needs with the economic realities facing regulated entities. Notably, the FSCA is not proposing any increase in the fees charged for specific services in the upcoming year.
The levies payable by FSPs are detailed in Schedule 2 of the Levies Act and are structured according to the type and size of the FSP. The calculation typically involves a base amount plus a variable amount, which is often linked to the number of key individuals and representatives, or the value of assets under management, depending on the FSP’s category.
For example, for Category I or IV FSPs, the proposed base levy for 2026/27 is R4,167.07 (up from R4,006.80), with a variable levy of R601.91 per key individual or representative (up from R578.76). The maximum levy for these FSPs is set at R2,893,800. Category II, IIA, and III FSPs face a higher base levy of R8,681.40, with variable components based on both personnel and assets under management. For FSPs focused solely on long-term insurance subcategory A or Friendly Society Benefits, the base levy is R4,167.07, but the variable component remains unchanged at R250 per individual.
FSPs, micro-insurers, collective investment schemes, and other supervised entities each have their own levy formulas, with most categories seeing a uniform 4% increase in both base and variable components. Regardless, the cumulative effect of levy increases, compliance costs, and technology investments is placing significant pressure on small and start-up FSPs.
Masthead, has submitted detailed commentary on the proposals, acknowledging the levy increase to 4% rather than the full CPI-based adjustment. However, noting ongoing challenges faced by smaller, independent FSPs, who are particularly vulnerable to rising operational costs, regulatory complexity, and constrained economic conditions.
The FSCA’s 2026/27 budget and levies proposals reflect a careful balancing act between funding effective regulation and supporting the resilience of the financial services sector. While the proposed 4% increase is below inflation, the industry may require an even greater sensitivity to the challenges faced by the smaller FSPs and other industry participants.
To access the annexures, click here.