Complying with EU rules set to cost €33bn The EU financial services industry is on track to spend €33.3bn over the next three years simply to comply with new regulatory demands, a study by the JWG regulatory think-tank has found. The projected costs, which will be spread across 8,500 institutions in the 27-nation bloc, could balloon to €50bn once Basel III bank capital requirements and Solvency II insurance safety rules kick in, the think tank said, based on a detailed survey of 87 financial services groups in 10 countries. High cost items include banks having to report far more frequently and in more detail on their large exposures, on counterparty risk and on collateral, as well as a host of new requirements for alternative investment fund managers. Enhanced stress testing and new requirements for "living wills," which set in place procedures for a possible shutdown in a crisis, are further jacking up regulatory reporting costs. The essential problem for companies is that the EU has been pushing through reforms piecemeal without co-ordinating their data requests either internally or with sprawling new demands from global banking and insurance regulators. "Regulators are asking for data in the way they want to look at it, not in the way banks are organised to provide it," said PJ DiGiammarino, JWG chief executive. The new rules also set tight deadlines for compliance, so companies are having to apply patchwork solutions to creaky IT systems rather than designing fundamental improvements, executives at one global bank told the Financial Times The data requirements are hitting particularly hard because there is so little standardisation in the way different companies track products and counterparties. Global regulators recently put forward plans to assign every market participant a "legal entity identifier" but it will probably take years to roll out. The new data demands come as banks, brokers and insurers have been looking to make cuts rather than spend more. Fifty-two per cent of the companies in the JWG survey said their regulatory reporting programmes had insufficient resources and personnel. The JWG study dovetails with other surveys that have found that banks simply do not have the kind of data gathering apparatuses that regulators want. Nearly four years after the Lehman Brothers collapse revealed that most banks had no way to track their total exposure to a big company, a survey released last week by the Institute of International Finance found that not much has changed. The industry lobby group found that 75 per cent of banks still cannot aggregate their exposure to a single counterparty without manual intervention - such as adding together results from multiple computer systems.