The creation of two new regulatory bodies for the financial services industry could burden companies in the sector with hefty additional costs.
According to a joint report by law firm DLA Piper and accountancy firm BDO, the replacement of existing regulator the Financial Services Authority with the Financial Conduct Authority (FCA) and Prudential Regulation Authority (PRA) in 2013 will be expensive for firms.
Two-thirds of respondents to the research on which the report is based expect costs to rise considerably following the regulatory change, while a similar amount anticipate spending more time communicating the benefits and differences to clients.
But while respondents acknowledge that the cost burden of regulation will increase, they do not appear to be allowing for an increase in headcount. Overall, 59% say there will be no change to headcount in the next 12 months and 20% anticipate no change in headcount in the next two years. Just 53% expect a 1-10% increase in the headcount of the compliance/risk function over the next two years.
Michelle Carroll, partner at BDO, said: "This reticence towards boosting relevant teams in the near term appears to be rooted in the fact that major regulatory developments such as Solvency II and Basel III have been delayed on a number of occasions".
"We therefore envisage a ‘hiring bubble’ developing over the next two years as key regulatory deadlines become imminent, potentially creating a ‘sellers’ market’ for key skills in which the cost per individual is increased."
Sally Percy is editor of The Treasurer