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

CP13/6
CRD IV for Investment Firms
Direct costs to the FCA
45. The FCA will incur incremental costs to implement the CRD IV package. The major costs will
arise from implementing COREP/FINREP. The incremental costs to the FCA to collect all the
required information will include IT systems and IT development staff. We currently expect the
one off cost to be circa £10 million, including the operational costs for 2014 and 2015. We
anticipate an on-going operational cost each year after of circa £300 thousand.
46. Additional to the reporting requirements, the FCA will need to implement business and
handbook changes. We expect these costs to amount to a one off cost of £5.4 million in
addition to the harmonised reporting costs.
47. The FCA will cover any additional supervisory needs arising from the regulatory packages with
existing resources.
Benefits analysis
48. The main benefits from CRD IV arise from addressing the market failures described above.
49. Overall, the major economic benefits arising from implementation of CRD IV come from
increased financial stability and reduced macro-prudential risk. We expect these benefits to be
described and estimated in the PRA’s CBA accompanying CRD IV.
50. We do not believe that the investment firms considered as part of this CBA can be considered
globally systemic. Just as the costs for investment firms will not be materially significant
compared to those of systemically important firms, the benefits are expected to be comparably
smaller. We have identified, however, areas where we believe the measures will reduce some
of the potential market failures and problems described earlier in this Annex.
51. The changes in capital requirements, i.e. the increase on capital ratios and the improvements
on the quality of capital, will increase the firms’ resilience to financial shocks and stress. This
will reduce potential spillover effects and negative externalities.
52. The new disclosure requirements will improve transparency and allow the effective monitoring
and comparison of the risk-taking activities of the regulated firms. Harmonised disclosure and
increased transparency will help reduce the information asymmetries that create uncertainty
during financial crises.
53. Improved transparency from new disclosure requirements will also support good corporate
governance, reducing instances of principal-agent problems. Such improvements may also
come about from new corporate governance guidelines. In general, improvements in corporate
governance will lead to efficient allocation of resources increasing productivity and reducing
the possibility of excessive risk–taking. It also allows senior management to have a clearer view
of the risks for decision-taking. This may increase investor confidence, leading to a positive
spillover as financial markets work more efficiently. Additionally, improved transparency leads
to a more accurate valuation of companies, benefiting investors.
70 July 2013
Financial Conduct Authority