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The impact and cost of regulation

The impact and cost of regulation

Better regulation is one of the main concerns that should be taken under consideration in the work on EU banking regulation over the coming years








​BRUSSELS, 26 February 2016 – Better regulation is one of the main concerns that should be taken under consideration in the work on EU banking regulation over the coming years. At present, banking regulation is essentially geared towards the requirements and needs of mainly publicly traded major banks that are active on European or even international level. Nevertheless, local banks have to apply to the same set of rules tailored for global players as they will eventually not be able to bear the regulatory burden placed upon them.

A cumulative impact of regulation should be made as the cost of regulation, for most banks in the EU, reaches 15% of total operating expense in terms of ongoing and one-off cost - according to a McKinsey study.

The regulatory costs have increased by 20 % per year over the past four years, excluding capital cost requirements or certain regulations as EMIR or CRR. In addition, 9% of human resources in the banking sector are fully dedicated to regulatory compliance – this can go up to 20% for small banks. On average, regulation accounts for 41% of the investment expenditure of banks – this proportion reaching 67% for small institutions. These conclusions are taken from the "Survey on the cost of regulation and its impact on the Luxembourg financial marketplace" by Ernst and Young.

"Each new regulation must be designed to support the real economy and thus to promote growth and increase jobs", said Chris De Noose, Managing Director of ESBG. In this context, the principle of proportionality could be a great help, as well as the idea of a simplified Single Rule Book mentioned by the EBA, he continued.

 

>> Visit the WSBI-ESBG positions page

>> See the EBA BSG Proportionality Paper

 

Communication - institutional & commercial; Regulation