The City regulator has warned it needs more money to cope with its extra workload following the Northern Rock crisis last year.

The City regulator has warned it needs more money to cope with its extra workload following the Northern Rock crisis last year.

The Financial Services Authority (FSA) had budgeted to spend £301.7m this year and £323m in 2008/09 on its core regulatory activity, although it often spends more on top of that.

But the regulator has assigned 100 extra supervisors and 50 more technical staff, some of whom are new hires, to cover "high impact firms" such as banks which, if they get into trouble, could cause problems for the wider financial sector.

FSA chief executive Hector Sants said: "It will lead to increased costs and that we are thus likely to exceed the levels of expenditure shown in the business plan for 2008/09, which will also have consequences for next year.

"I do, however, believe that this necessary investment is supported by the firms who will benefit from the resultant higher-quality supervision."

The regulator is funded by the companies it supervises which face a "significant increase" in their FSA fees in 2009-10, Sants warned.

He said extra staff costs would be met from surplus funds in the current financial year but in the following year regulated firms would have to foot the bill.

"Firms are likely to see a significant increase in fees in 2009-10," Sants said. "We will do our best to mitigate the cost with savings elsewhere."

Sants repeated his "regret" over the circumstances involving Northern Rock, which was taken into public ownership in February after the FSA failed to spot its high-risk expansion strategy which caused it funding problems during the credit crunch.

He also backed recent controversial moves by the regulator to force hedge funds and investment banks to disclose when they are betting on falls in a company's share price while it is trying to raise capital Sants said: "I believe we have demonstrated our willingness to be brave and to make difficult, directive judgements - even when we know we will be criticised by vested interests. The most recent example of this was over short selling."