Over 15 man-years and up to £700 million needed for compliance
Atos Consulting estimates that compliance with the Liquidity regulation will, for the largest financial institutions, require over 15 man-years of additional work to be completed this year. It also estimates that it will cost the UK Financial Industry between £300 and £700 million to implement.
As experts in implementing regulatory solutions, Atos Consulting warns that financial institutions still face a challenging timescale in order to comply with the liquidity regulation, despite yesterday’s report from the FSA which confirms the implementation date has been postponed by three months to January 2010.
Even so, Atos Consulting suggests that financial institutions are in danger of missing the implementation date, if they are not by now completing the assessment stage of the project. Due to the variety of sources and systems from which the banks need to draw data for the daily, weekly and monthly reports to the FSA, implementation needs to start imminently.
In light of the recent job losses at a number of the major financial institutions, there is a high risk that in order to meet the deadline for the liquidity regulation, other projects such as those related to post M&A integration, will need to be postponed.
Overall Atos Consulting welcomes the latest consultation paper from the FSA, which it believes provides the detailed requirements that financial institutions need to confidently commission the necessary changes to their IT systems.
Background information:
On April 15th 2009, the FSA published the latest in its series of Consultation Papers on Managing Liquidity (“Strengthening Liquidity Standards 2: Liquidity Reporting” - http://www.fsa.gov.uk/pubs/cp/cp09_13.pdf). This paper sets out in detail the regulatory reporting requirements for the new regime.
Driven by recent market turmoil and ongoing uncertainty, the new Liquidity Regulations aim to ensure banks reduce balance sheet risk through enforcing increased holdings of low yielding liquid assets, particularly Government bonds. The new Liquidity regulations also impose wide-ranging requirements on risk identification, measurement, monitoring, control, reporting and contingency planning to strengthen a firm’s capacity to withstand shocks - all with considerable technology and business process implications.
The UK is the first country to introduce regulation of this type which Atos Consulting believes will set a precedent for other European countries to follow.