mandatory costs

mandatory costs
The costs associated with banks complying with certain regulatory funding requirements (as opposed to capital adequacy costs which will be within the margin). The Bank of England, in common with central banks in many jurisdictions, requires banks to place non-interest bearing deposits with it; the income from investing these deposits is used to help fund the Bank's supervisory role. The amount of the deposit is calculated as a percentage of a bank's "eligible liabilities" (essentially sterling deposits made with that bank).
Since 1 June 1998, when the Financial Services Authority (FSA) took over most of its supervisory role, the Bank has lowered its requirements to reflect its reduced supervisory workload. However, the FSA introduced its own fee structure (not a deposit) to help fund its function.
For further information, see the FSA website () and the Bank of England's website ().

Practical Law Dictionary. Glossary of UK, US and international legal terms. . 2010.

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