Asset managers need to up their capital buffers 82 per cent in order to meet the FCA’s requirements, KPMG research reveals.
The Picking up the Pace report says every asset manager in its survey that had been visited by the FCA about its risk controls had been asked to hold extra capital.
The report calculates that the average mid-sized firm would have to add an additional £31m and would be disproportionately hit by the requirements.
The FCA told Aberdeen Asset Management to increase its capital buffers to £475m last September to cushion the firm from large financial shocks.
But KPMG warns smaller asset managers are increasingly in the regulator’s sights.
Some asset managers have seen their share prices fall and had to cancel dividends, or ask parent companies for a cash injection following an increased capital requirement, KPMG notes.
The consultancy says boutique firms are already disproportionally affected by the costs of regulations such as Mifid II and having to hold more capital will be a significant opportunity cost.
“Every pound held in capital is a pound that can’t be invested in growth, digital or implementing regulation,” says asset management partner David Yim.
Risk management across the industry has been improving since they began the survey in 2015, says Yim.
But he warns: “Given the potential damage to business, and in an increasingly tough regulatory and commercial environment, firms need realistic, defendable capital assessments, or else the regulator will soon do it for them.”