FSA says regulatory costs will fall over time
Sir Howard Davies, chairman of the Financial Services Authority, says regulatory costs hitting financial firms, which have risen since the watchdog took over control of the City, will fall over time.
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His comments follow the publication of Cost of Compliance: A Report by Europe Economics which also looked at ways firms can reduce their compliance costs.
Complying with anti-money laundering requirements were seen as particularly costly, although these are the results of UK and EU legislation, not regulations introduced by the FSA.
With regard to the City watchdog itself, half the firms questioned estimated that incremental compliance costs of FSA regulation added between 0% and 2% to operating costs, with 14 reporting values between 2% and 10% and 5 indicating values between 10% and 20%.
Among the counter-measures suggested are:
- Open and proactive contact with FSA supervisors
- Monitoring compliance and implementing regulatory change
- Using risk-based monitoring
- Implementing compliance measures in close conjunction with the legal function.
Sir Howard acknowledged that compliance costs had risen, but said that as a proportion of operating costs they were significantly lower than indicated in earlier industry surveys.
He added that a report published last week by CSFI showed that international firms rate the FSA above other regulators in terms of competence and a light regulatory touch.
‘We plan now to discuss the report’s conclusions with compliance officers in firms of different kinds. And we shall, in particular, be improving the advice and guidance we give, which as the report shows, can help firms meet their obligations more cheaply.’