CP13/6 - CRD IV for Investment Firms - Financial Conduct Authority

CP13/6
CRD IV for Investment Firms
5.6 A cumulative distribution for each impact factor has been produced based on data currently
reported by firms to the FCA and ordered from highest to lowest. This allows the FCA to
assess the marginal impact of imposing each requirement on one more firm. For example,
the marginal impact analysis of the balance sheet assets impact factor shows that 68% of
all balance sheet assets are held by only 39 solely FCA regulated CRD IV firms. The marginal
benefit of imposing requirements due to the impact resulting from the amount of assets held
on the balance sheet rapidly declines after this point.
5.7 The cut-off point will fall within a marginal impact range. The lower bound of this range is
based on the point at which the slope of the curve falls below 100% (i.e. the point at which it
could be argued that the marginal cost rate is greater than the marginal benefit rate, where the
gradient is 1). The upper bound is based on the point at which the slope of the curve falls below
50% (gradient of 0.5). Within this range the cut-off point is based on the percentage of firms
captured; so for steep curves the number will tend to be less than that for shallower curves.
5.8 Broadly, we aim to capture the firms that constitute at least the top two thirds of the total
market for each indicator. However, due to the broader distribution of fees and commission
income across firms, we have lowered that threshold.
5.9 While this proposal applies at an individual firm basis, the FCA reserves the right to apply the
criteria at a consolidated level where deemed appropriate.
Market analysis
5.10 The graphs below show the cumulative distribution for each of the impact factors, the upper
and lower bound and the proposed thresholds:
• Figure 2: Cumulative total assets: 39 firms account for 68% of the total assets within
the market, of which the firm accounting for the lowest value of assets holds approximately
£530 million of assets. We therefore propose that the threshold for total balance sheet
assets is £530 million.
% of total assets
100
90
80
70
Gradient = 0.5 which ≈ 68% (£530 mn)
60
50
40
Gradient = 1 which ≈ 53% (£1.1 bn)
30
20
15 Firms 39 Firms
10
Captured Captured
0
1 11 21 31 41 51 61 71 81 91
Number of Firms
113
102
91
79
68
57
45
34
23
11
0
£ Billion
44 July 2013
Financial Conduct Authority