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

CRD IV for Investment Firms
CP13/6
Annex 1:
Cost benefit analysis
Summary
1. On 16 December 2010, the Basel Committee published Basel III, which outlines proposals for
a strengthened set of prudential requirements for banks. In the EU these proposals have been
implemented through the CRD IV.
2. CRD IV expands the scope of firms subject to this legislative package to investment firms.
Approximately 2,400 investment firms are authorised within the UK and are prudentially
regulated by the FCA. We estimate that 80-90% of these firms meet the EU definition of SMEs.
3. This CBA analyses the incremental impact of the overall package of CRD IV in terms of its effects
on firms and markets within the FCA remit. Where appropriate and feasible, the estimated impacts
of individual discretions or regulatory changes have been presented in the relevant CP chapter.
4. The main impacts of CRD IV will be on systemically important institutions which are mostly
regulated by the PRA. Both the costs and benefits for FCA regulated firms will not be as significant.
However, in relative terms, the cost for small FCA regulated firms could be important. These
costs will mainly arise from the new reporting obligations and additional capital requirements.
Similarly, the main costs for the FCA will arise from the new reporting framework. Similarly to
the cost, we do not expect the benefits of implementing CRD IV to investment firms will be as
significant as those arising from the implementation on systemically important firms. However
CRD IV will reduce potential market failures by improving transparency, corporate governance
and the levels and quality of capital. Finally, we do not expect material macroeconomic
impacts due to the effects of CRD IV on investment firms; these will again be mainly driven by
systemically important firms and are presented in the PRA’s consultation paper.
General approach to the CBA
5. This Annex contains the FCA’s cost benefit analysis (CBA) for transposing the Directive provisions
– where it is the responsibility of the FCA – and exercising certain discretions in the Regulation in
the UK. This CBA focusses on the impacts arising from the implementation of CRD IV on FCAregulated
investment firms. PRA-regulated firms are out of scope and have been considered in
the CBA accompanying the PRA’s consultation paper on the implementation of CRD IV.
6. When proposing new rules, we are obliged under section 138I of FSMA to publish a CBA,
unless we believe there will be no increase in costs or that the increase will be of minimal
significance. We are required to publish an estimate of costs and benefits unless they cannot
be reasonably estimated or it is not reasonably practicable to produce an estimate.
Financial Conduct Authority July 2013
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