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

CRD IV for Investment Firms
CP13/6
Table 17: Estimated incremental annual on-going compliance costs per firm 19
Costs per firm (£ thousands)
Investment Firm
Type
Small Mid-Size Large
Full-Scope 2 12 61
Limited Activity 19 NA NA NA
Limited License 3 4 11
29. We estimate that the total COREP/FINREP compliance costs per firm range from £50 thousand to
£2.2 million pounds depending on the size and type of firm. These estimates are based on the
assumption of a perpetual stream of on-going costs discounted at 3%. However, as mentioned
before, there will be an EU wide review of the whole prudential regime for investment firms by
31 December 2015. Estimating only the costs involved until the review date, the total compliance
costs per firm would range from £15 thousand to £500 thousand. These costs are incremental to
those the firms already incur in reporting capital and financial information.
30. Extrapolating these costs to the entire estimated population that will need to comply with
the new reporting framework, the approximate overall cost until December 2015 will be £35
million. This figure is based on the approximate number of firms affected and the estimated
one-off and on-going compliance costs per firm shown in the tables above. The number of
firms affected in practice may be slightly larger, marginally increasing this overall cost.
31. These costs will arise from changes in information systems, data requirements, data
transmission procedures, staffing and training, senior management reviews, external services,
data publication and other areas identified by firms. Firms were also asked to include in their
estimates the incremental costs due to changes to the frequencies and timing of reporting
required by this regulation.
32. In general, smaller firms expect most of the cost to be associated with IT and external consulting
services. Mid-size firms estimate the cost of senior management time to review to be the most
important. Data verification, capturing and submission are expected to be the main additional
cost for the larger firms.
33. In addition to the costs associated with COREP/FINREP as outlined above, there are likely to be
additional administrative burdens arising from a requirement for some firms to develop internal
whistle-blowing systems and from corporate governance requirements. However we expect
these incremental costs to be small compared to those arising from the reporting requirements.
Other changes relate to governance and risk management arrangements, which may drive
additional costs. These are likely to be proportionally higher for more complex firms, who have
more intricate risk management and regulatory compliance arrangements.
Capital compliance costs
34. CRD IV changes firms’ capital requirements by increasing the level and quality of capital.
The main impact on firms may come from (1) changes to the composition of capital and risk
weighted assets and (2) changes to minimum capital ratios.
19 See footnote 18.
Financial Conduct Authority July 2013
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