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People always talk about the “cost of regulation,” but what is the actual regulatory cost? So, how much does it cost to provide office space, training, facilities, and more, like major regulators like European banking authorities? We know now thanks to their contract transparency process.
There are some interesting items out there. For example, the EBA is receiving a very advantageous deal from Bloomberg Finance LP or has only one terminal in the building.
They actually spend more with several other data providers – 56,319 euros on Dealogic and 102,188 euros on S&P. There is also a 3,969 euro contract with Deloitte to train staff on how to use the “financial IT system.”
The contract list also includes arrangements from office leases, furniture suppliers, and more “leadership training”, “skill development”, and “collaboration” consulting companies. The EBA spent 96,128 euros on “language training and testing” in 2024.
However, our attention was immediately drawn to one budget item. If you want to assess the strength and vitality of your system, this is always a good place to start.
The EBA has approximately 250 staff. Approximately 60 euros per head are spent on coffee per year. Whatever the allowance for overhead, profits, or capital costs, it cannot reach more than about a cup and a half per week. Some coffees may be included in the 209,966 euro contract for “catering services and consumables,” but even if we cut numbers, we won’t be able to escape the conclusion. The coffee budget is large enough to supply in guests and meeting rooms.
In other words, the EBA breaks Patrick Mackenzie’s fundamental laws of management.
This sounds like a trivial observation, but it’s not.
Organizations that make people pay for coffee don’t want to win.
– Patrick Mackenzie (@patio11) July 25, 2024
As he says, free coffee is far from trivial. The EBA is a very important organisation, and is always given new responsibility (such as crypto regulations and on-site inspections of data centers) by lawmakers who are not the same enthusiasm to allocate sufficient budgets. Minutes of the Management Committee meetings regularly discuss the intensity of resource pressure. Recently, I raised the possibility of a 12-month moratorium on a new submission to the Q&A website to clear the backlog of questions.
This has practical consequences for the banking industry. Recently, the EBA appears to have influenced a very important decision (“Danish compromise”) that affects several live mergers.
Producing first-class pieces in environments below the first class is extremely difficult, and the availability of decent high quality coffee is the coal mine canary whether employees are supported or not. It’s like the legendary “No Brown M&M” of the rock tour. If EBAs generally spend tenfold on creature comforts, this could cost 1 million euros.
Prices seem to be cheap as even minor regulatory misconceptions can be of great significance.
