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Financial services firms struggling to keep up with global regulatory compliance

Executive management are not being kept fully informed of compliance issues

20 March 2012

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By Manju Manglani, Editor (@ManjuManglani)

Compliance teams at financial services companies are struggling to keep up with the growing demands of global regulation, according to a recent survey.

A combination of rapidly-increasing regulations and rising responsibilities for compliance professionals, coupled with limited resources and constrained budgets, are raising concerns that they have reached saturation point in their ability to successfully manage compliance. Indeed, 84 per cent of compliance professionals expect to handle more regulatory information in 2012.

There has been a fairly steady 16 per cent year-on-year increase in global regulatory activity, with nearly 60 new regulatory announcements every working day, according to the report.

Among the major changes anticipated this year are the splitting apart of the UK Financial Services Authority, an increase in the direct regulatory power of European supervisory authorities, the expansion of several new and existing regulatory agencies in the US as a result of the Dodd-Frank Act, and the increasingly global reach of regulations such as the UK Bribery Act and the US Foreign Account Tax Compliance Act.

While regulatory requirements continue to grow, resourcing constraints are limiting the ability of compliance teams to perform vital functions.

Two thirds of respondents anticipate that they will not have the capacity to influence regulatory policymaking this year. A third of compliance professionals said there will be a greater need to devote resources to influencing and lobbying regulators and policymakers in order to help shape the direction of future regulations.

More than a third of compliance professionals said they spend over an entire working day each week simply staying up to date with regulatory changes and assessing their impact on the business.

Compliance teams have also reported difficulties with finding time to coordinate with other parts of the company involved with managing regulatory risk. More than half of compliance professionals surveyed said they spend less than an hour a week working with internal audit colleagues. A third of respondents said they similarly spend less than one hour a week consulting with their legal and risk teams. 

While keeping executive management informed of regulatory issues is a key part of the compliance role, more than a quarter of respondents said they spend less than an hour a week reporting to their boards. In the US, more than half of the companies surveyed spend less than an hour a week reporting to their boards.

Despite these challenges, only 11 per cent of companies expect to significantly increase their compliance budgets this year. The cost of senior compliance staff will also likely be higher this year. This raises serious concerns about whether budget levels will be sufficient to cover the expected increase in the scope and volume of regulatory change.

The Thomson Reuters survey covered more than 500 compliance professionals at financial services companies around the world.

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