The Financial Services Authority (FSA) says implementation of the European Union's Markets in Financial Instruments Directive (MiFID) could cost the UK's financial services industry up to £1 billion.
The quantified one-off cost of implementing MiFID could be between £870 million and £1 billion, with ongoing costs of around an extra £100 million a year, says the FSA in a paper.
A study released earlier this year by consultancy Atos also put the bill for UK firms to comply with MiFID at £1bn.
The FSA adds that, under certain assumptions, the directive could generate some £200m a year in ongoing benefits, mainly through reductions in compliance and transaction costs.
The cost estimates are based on a survey of firms that were asked to set out their actual and/or expected budget for MiFID implementation. The results from this survey were then aggregated using estimates of the total number of firms directly affected by MiFID.
Hector Sants, MD, wholesale and institutional markets, FSA, says: "It is in the nature of regulation that costs are relatively easier to define and quantify for firms while benefits can be harder to pin down.
"As we have already foreshadowed, it is clear that implementation of MiFID represents a substantial cost to industry particularly in the upfront years, but it does create the potential for revenue opportunities over the longer term. We would encourage firms to focus on these opportunities."
Read the FSA's report here:
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