FSA/PN/053/2005
20 May 2005

The Financial Services Authority (FSA) has stepped up its ground-breaking study to measure the real costs of financial regulation with the appointment of Deloitte to carry out research among regulated firms. The study is being conducted in partnership with the independent Financial Services Practitioner Panel.

The FSA hopes to establish the full cost to financial firms of compliance with regulation under the Financial Services and Markets Act. From this, it hopes then to identify those costs that are incurred solely as a result of the Act and those that firms would still incur even if this regulation were not in place. It believes that it is the first financial regulator to undertake such an ambitious research project.

The project will initially focus on measuring the total and incremental compliance costs of regulation for small and large firms in three regulated sectors:

  • Investment banking – Corporate Finance advice
  • Investment and pension advice to retail customers
  • Institutional fund management

Once the methodology is established, it may be extended to other sectors in further projects.

Samples of firms in these sectors will be invited to attend workshops, asked to provide returns, and interviewed by Deloitte staff. Trade associations and firms from sectors not included in this initial work will be kept informed and will have the chance to contribute.

The regulator announced its plans in its 2005/06 Business Plan, published in January, and the completed study will be published towards the end of the year. The Panel and the FSA will publish their responses to the study and plans for future work at the same time.

Notes to editors

  1. The purpose of this project is to provide robust estimates of the costs to firms of financial services regulation in the UK stemming from the Financial Services and Markets Act 2000 and, by doing so, to help identify where there may be substantial costs from discretionary elements of regulation that are not matched by corresponding benefits.
  2. The project steering group comprises: John Tiner, David Kenmir and Kari Hale from the FSA; Jonathan Bloomer, Chairman of the Practitioner Panel; Roy Leighton, Deputy Chairman of the Practitioner Panel; and Ruthven Gemmell, Chairman of the Small Business Practitioner Panel.
  3. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
  4. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.

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