The accelerating pace of regulatory change
Regulatory environments globally are becoming increasingly complex[1] – 300+ million[2] pages of regulatory documents will be published by 2020 and 600+ legislative initiatives need to be cataloged by a medium-sized, sell-side institution to have a holistic view of their rulebook.
Global financial institutions must diligently monitor and implement change in three regulatory clusters: financial stability, prudent operations, and resolution. The flood of revisions averages 200 per day – three times the rate in 2011[3]. The Cost of Compliance 2018 Report[4] found that 66% of firms expect the cost of senior compliance staff to increase, up from 60% in 2017. Nearly two-thirds (61%) of firms expect the total compliance budget to be slightly or significantly more over the next year – another increase from last year (53%).
Source: Global Risk 2018: Future-Proofing the Bank Risk Agenda[5]
Globally, banks are spending more than $270 billion a year on compliance and regulatory obligations, having on average 10–15%[6] of their staff dedicated to compliance.
Overall, compliance costs for financial institutions amount to substantial parts of total expenses, with a negative correlation between the size of the institution and the percentage of total costs[7]. For banks with assets ranging from $1 billion to $10 billion, total compliance costs are averaging at 2.9% of their non-interest expenses; for banks with less than $100 million in assets, the costs averaging at 8.7% of their non-interest expenses. For some banks, it takes up to $4 billion[8] a year to cover demands ranging from checks
