New Approach Urged in Dealing With Regulatory Onslaught

Terry Flanagan

The raft of new regulations which are impacting on financial institutions on both sides of the Atlantic are causing many compliance headaches—although the current approach taken by many firms in dealing with the problem may actually be exacerbating the situation.

New and upcoming regulations such as MiFID II, Fatca, Dodd-Frank, Basel III, AIFMD and Emir are ramping up costs and adding new layers of complexity for financial services firms, with many assigning separate teams to deal with each new regulation. But a more joined-up approach is being championed in a bid to cut costs and also steer clear of the regulators’ claws.

“The sheer number of new and evolving regulations that are coming down the road is simply staggering,” said Mark Murphy, chief executive of Fenergo, a provider of client onboarding lifecycle management and compliance services for financial institutions, in a recent blog.

Murphy said that firms are “viewing each of these regulations in a separate and siloed way” resulting in a “separate team, budget line, implementation, processes and technology solutions for each regulation”.

“The cost and complexity of managing something like this must be phenomenal,” he added.

Murphy says a “horizontal approach” is the best solution, whereby “all regulations can be solved in one go”.

“It does take careful planning and consideration but the pay-off is significant once in place,” said Murphy.

“With so much pressure on financial institutions to meet looming deadlines, it’s quite likely that many will miss the initial implementation deadline dates. Furthermore, for those that do meet the deadlines, it may well be at the cost of adopting poor compliance standards in an effort to get it over the line, leaving them susceptible to the scrutiny of regulatory audits.”

And with financial institutions in general still struggling in the low-volume trading environment—despite a recent pick-up—regulation and compliance costs are likely to remain a significant drag on business in the coming months and years, according to a new survey published by auditor PricewaterhouseCoopers and the Confederation of British Industry (CBI), an employers’ group.

Among its findings, the survey revealed that 61% of respondents expected to increase regulatory spend over the next 12 months, compared with just 49% last quarter.

“This has been a strong quarter for the financial services sector, with robust growth in business volumes, an increase in profitability and upbeat investment intentions,” said Matthew Fell, director for competitive markets at the CBI.

“[But] at the same time, regulation and compliance are still likely to be significant drags on business throughout this year.”

Related articles

  1. EMEA is leading the way in creating a safe and secure regulatory environment for crypto.

  2. Trading Europe From ‘Across the Pond’

    EFAMA said a real-time tape for equities with the inclusion of pre and post-trade data is needed.

  3. Trading Europe From ‘Across the Pond’

    Cboe acquired EuroCCP on 1 July 2020.

  4. ETFs in Europe had net outflows of $5.06bn in September.

  5. European ETFs Continue Record Growth

    €STR futures provide an efficient way to hedge European money market rates