Business Models

As retail banks struggling with cost of compliance, this has to be turned into an opportunity

Regulation and compliance has significantly grown, particulalry following September 11th, 2001. The need to address funding of terrorism, and organised crime, the desire to better protect consumers, and the need to ensure a stable financial system in times of emergency, have driven unprecedented levels of regulation, and compliance activities worldwide.

Finextra: UK retail banks struggling with cost of compliance

Almost a third of UK retail banking and insurance organisations say that industry regulations on documentation are placing additional cost burdens on their business, according to a study released by Thunderhead and Xansa.The survey of 50 banks and insurance firms found that 65% believe the cost of effecting any necessary changes to templates as a result of FSA regulatory changes would be 'very' or 'quite' costly. Only five per cent believed it would not be costly at all.

 

The winning banks however will not see this is a burden. It is time to perform a strategic assessment of the expected situation over the next 10 years. There are significant points of alignment between the new regulation, and rational bank strategies. Banks have grown up with a history of consolidation of disparate systems. Banks have historically been product oriented, so the deposit/DDA system is separate from the mortgage system, separate from the credit card system, etc.

The introduction of online banking, sped the development of integration technologies, common, shared middle tier software that can provide customers the integrated information they demand. All banks have this problem, and many rely on paper reports, interpreted by staff to provide an integrated customer view.

Points of intersection between regulation, and typical strategy could be:

  1. quality customer information, centred on the complete customer profile
  2. stable redundant systems
  3. quality, simple and effective workflow processes

Relevance to Bankwatch:
Time to perform a strategic assessment of the regulatory environment, and direction, and hold that assessment up against integration activities and specify the key points of intersection. Make those aspects the priority going forward, and both customers, and regulation will win, and the sense of regulatary "burden" will be reduced.