The good news is that Banks have an enormous opportunity. The bad news is that the first steps to grasp that opportunity have yet to be taken.

One important reason for escalating costs is that many financial institutions have not taken advantage of the overlapping elements of the requirements they face, such as Sarbanes-Oxley, Basel, and the USA PATRIOT Act.

……

many financial institutions have replicated compliance practices in individual lines of business, which has resulted in similar processes, procedures, and requests for information being multiplied across the enterprise.

This is an surprising report for me. I have witnessed what they speak of, yet I assumed it was was ‘just us’. Turns out Banks generally have not embraced technology to address compliance. In fact I recall blogging a while back about the opportunity to get a two for one, by gathering customer data in meaningful ways for customers, and get the compliance needs at the same time. I suspect Wells Fargo, the example I used a couple of years ago, are somewhere down that road, when they introduced their spending analysis product.

The report, which is US focussed, yet introduces concepts that are generic, speaks of Sarbanes-Oxley, Basel, and the US Patriot Act. Banks are typically implementing teams to address each of those individually, and missing opportunities to address cohesively.

Furthermore, Banks are addressing those matters with people. They have largely not introduced technology to address. Clearly this is not a long term strategy; people are a forever cost, and technology is a depreciable cost that is one time, and replaces people cost if done correctly. The percentage of Executive time devoted to compliance is particularly stunning.

The report outlines the complexity of the environment that Banks face, and given Banks’ general style, it is understandable how they got here. There are some very interesting insights though such as this gem:

90% felt the environment had become more challenging, but 65% felt their own policies had become more challenging.

Banks can indeed be their own worst enemies. This is an important read for Bankers and not just those involved in compliance. The issues affect everyone involved in strategy, and getting value from all technology investments will involve more than the compliance department.

Anyhow for the full report visit the Deliotte site.

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