And the expectation of increased compliance costs in the aftermath of the FSA’s split into a twin-peak structure in 2013 has duly stepped up to fill the gap, according to consultancy firm Protiviti.
A survey conducted by Protiviti found 50%of senior compliance professionals at financial services firms warn their company’s costs of compliance will increase by up to 20% under the new ‘dual’ regulatory regime.
On top of this only 17% of the survey respondents think their firm is “completely” prepared for the different reporting demands and processes of the new structure which will see the FSA split into the Prudential Regulation Authority (PRA) and the Financial Conduct Authority (FCA).
Preparation lacking
A further 63% said their company is ‘partially’ prepared, while 13% admitted their firm is ‘only starting to prepare now’.
Ian Stott, client services director at The Consulting Consortium, said he was not familiar with businesses pin-pointing the dual regulatory system as the chief reason for increased compliance costs.
“There is a general increase in compliance and regulatory costs which is largely down to the amount of changing regulation. If you think of the sheer amount of papers, guidance consultation and policy statements coming through at a fierce pace, these are some of the drivers of cost escalation.”
On top of the 50% expecting a 20% rise in compliance costs, over one in ten (13%) of senior compliance professionals anticipate a rise of over 20%.
Likelihood of success
What’s more, the respondents of the survey do not have much confidence in the success of the new structure in preventing a future financial crisis. More than two-thirds (67%) or respondents in the Protiviti survey felt the system would ‘not’ or ‘probably not’ be effective in preventing a future financial crisis, while only 20% thought it would ‘probably be’ effective.
Bernadine Reese, managing director of Protiviti, said: “The changes to the UK regulatory architecture are major changes that firms need to fully understand and address sooner rather than later. The FCA and PRA have very different mandates and powers, and firms will need to fully understand their responsibilities and plan how best to respond to the regulators’ agendas.”
Concern surrounding the changes is clear, with 17% of senior compliance professionals stating their company’s management and board are ‘very concerned’ and 35% saying they are ‘somewhat concerned’, while just 7% said the management and board of their company are ‘not concerned’.
The Protiviti survey was conducted between 23 July and 6 August on 30 senior compliance professionals working in UK financial services institutions.
