The FCA expects the extension of the Senior Managers Regime to cost the financial services industry at least £547m in up front expenses.
In a consultation released today, the FCA confirmed its plans to roll out similar rules as those that currently apply to banks to nearly all financial services firms.
Firms including advice businesses (provided they are not sole traders) will have to prescribe specific responsibilities to particular individuals to ensure accountability and certify that those below them are fit to do their jobs.
All firms will also have to meet a handful of new conduct rules.
The regulator’s cost benefit analysis shows that for “core” firms to fall under the rules, a one-off cost of £190.5m to £193.1m is expected, with a further ongoing cost of £65.4m to £81.1m.
For “limited scope” firms, including one-man-bands who will not have to adopt some of the prescribed responsibilities, this figure is similar, at £194.3m to £196.3m up front, and £53.2m to £76m thereafter.
“Enhanced” firms – those that are the largest and most complex, with extra requirements covering less than the top 1 per cent of regulated firms – will take a up front hit of roughly £162m and face between £21.5m and £33.5m in ongoing costs.
The figures are based on self-report data after the FCA sent a survey to more than 2,000 firms asking how much they predicted applying various areas of the rules would cost.
The FCA itself expects to spend £13.4m over four years implementing the new regime.
The regulator adds that lower redress payments and fines for firms as the result of better controls under the SMR are likely to outweigh the compliance costs of the reforms.