Asset managers, pension funds, banks and insurers expect to spend more on tax and regulations in 2015 and the following years, according to a poll by BNY Mellon at its annual Tax and Regulatory Forum.
At the beginning of the event 41 percent of 250 attendees thought that tax and regulation costs would be higher in 2015 than 2014, and 5 percent thought costs would decrease.
By the end of the conference, which explored the effects of tax and regulatory changes, 71 percent expected an increase in costs.
“The global trend towards tax transparency is at the heart of regulatory reform,” said Mariano Giralt, head of EMEA tax services at BNY Mellon.
“The challenge for financial institutions is to keep pace with a host of new initiatives which include FATCA, the OECD’s Common Reporting Standard and potentially a Financial Transaction Tax which would cover 11 EU countries. These initiatives are adding significant compliance costs for financial institutions.”
More specifically, 43 percent thought that the costs of compliance for UCITS 5 would be more than those of the alternative investment fund manager’s directive (AIFMD), and 29 percent thought they would be the same or less. When asked when they would implement changes for UCITS 5, 65 percent said they were still undecided.
Just over half of respondents (51 percent) expect to see higher costs and less choice, but with the benefit of better protection. A vast majority of 82 percent said they can see opportunities arising from the changes, and half of these thought the opportunities as material to their business.
Opportunities were considered to varied, with 38 percent seeing benefits in cost savings, 24 percent highlighting new markets and asset classes, and 15 percent identifying opportunities in product development.
Generally, respondents were concerned about the timing of the regulations, and many expressed concerns about a compliance-and-approvals bottleneck forming in Q1 of 2016.
When asked when they expect to see a slowing in the wave of regulatory change, 54 percent answered ‘never’, while 38 percent were more optimistic, predicting a slowing in 2017.
Paul North, head of product for Europe, Middle East and Asia at BNY Mellon, said: “There seems to be a consensus that the next two years will be the most demanding in terms of tax and regulatory work and costs. Despite this, we also note the continued optimism among asset managers when they consider their longer term prospects around, and ongoing interest in, reducing costs and maintaining the pace of product development.”
