European Financial Firms To Spend Billions On Adapting To New Regulation, Says Think Tank

Max Skjönsberg

26 June 2012

Financial services firms in Europe will have spent €33.3 billion ($41.5 billion) on beefing up their prudential regulatory capabilities by 2015, according to JWG, a UK-based think tank specialising in European financial regulation.

The think tank forecasts that when forthcoming regulatory initiatives - such as CRD I, RRPs and Solvency II - have been put into practice, the figure could approach the €50 billion mark.

"Simply put ‘better’ regulation...could save the industry €24 billion in implementation costs during a period when it is desperately needed to stimulate economic growth," the think tank said.

JWG believes that the €24 billion figure can be arrived at through regulatory harmonisation: alignment of policy goals, sufficient implementation timelines and common standards. "In the EU, where regulators increasingly overlay the same requirements across a range of divergent jurisdictions through regulation (as opposed to directives), differing laws, languages, economies and political systems all contribute to differing levels of regulatory alignment," the think tank said in a report entitled Dirty Windows: Regulating a Clearer View.

JWG, which focuses on technology in finance, also surveyed 87 financial firms, including asset managers, based in Germany, the UK, France, Luxembourg, Belgium, the Netherlands, Sweden and Finland about their reporting capabilities.

Three quarters of respondents said regulatory reporting improvement is fully supported across the firm, but only half said that reporting programmes have sufficient resources and staff.

Nine out of ten firms said that it would take at least six months to make a change to their reporting solutions; forty-three per cent said it would take over a year.