UK financial services firms spend £600 million on red tape
29 June 2006 | 3808 views | 0
The UK financial services industry spends about £600 million a year dealing with regulatory red tape, according to a report published by the Financial Services Authority.
The watchdog commissioned the study in response to business complaints about the rising tide of regulation.
It found that money laundering rules account for by far the largest single set of administrative burdens on the UK financial services industry, accounting for around 40% of the total estimated cost. Regular reporting rules were also found to be a significant drain on management time and resources.
Commenting on the findings, John Tiner, FSA chief executive says: "The more significant costs appear to arise from providing point of sale documents to retail customers, monitoring employees' compliance, handling complaints and reporting to the FSA. We have an important programme of work ahead to assess, with an open mind, whether these incremental costs are justified by the benefits and, if not, what changes we need to make."
A separate study by Deloitte found the cost of FSA compliance in the retail sector far outstrips the burden placed on wholesale market players - for whom European Union legislation such as MiFID is more pressing. Deloitte also found businesses within the same sector were incurring variable costs as they interpreted the same rules in different ways.
Publication of the data coincides with the release of a report by PriceWaterhouseCoopers in which bankers worldwide identified regulatory overkill as the greatest risk facing the industry. The research, which engendered 468 responses from 60 countries, suggests that efforts by governments and regulators to ease the administrative burden have yet to bear fruit.
Banks also expressed misgivings about their growing dependence on technology and the threat to their operations from malicious attacks by hackers and cyber-crooks.