Insights

The future of regulatory productivity

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The cost of compliance and risk mitigation over the last eight years has jettisoned almost all discretionary funding available to firms. Compared to pre financial crisis spending levels, operating costs spent on compliance have increased by over 60 percent for retail and corporate banks. Policy makers, regulators, and shareholders are looking for firms to not only meet new regulatory requirements, but to ensure the effectiveness of all that has already been built. These increasing compliance-related cost pressures, coupled with low interest rates, a slow economy, and stagnant revenue growth, has resulted in significant downward pressure on returns.

Complying with regulations is becoming an increasingly complex, cross-functional effort. It is no longer a domain of just the CCO or CRO. Other CXO roles, like the CISO, chief conduct officer, CFO, and CDO – and, indeed, front-office executives – have critical parts to play in the planning and implementation for compliance. For example, the DOL Fiduciary rule has significant impacts on sales (financial advisors), operations, compliance, reporting, and recordkeeping, to name a few of the functions being impacted. Operations processes in these areas and the technology applications that underpin these processes are also heavily impacted.

Many CXOs across institutions are looking for opportunities to dramatically improve regulatory productivity (i.e. meet compliance requirements at lower costs). The focus on traditional cost reduction options – process reengineering, lean, location-based strategies, and automation – have yielded some relief, but now many CXOs are looking at emerging technologies for transformation. Most FSIs do not have the capital or the time to rebuild their platforms.

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RegTech, the application of technology to regulatory compliance, has the potential to disrupt the financial services world. Already, RegTech is helping firms to support components of compliance processes in a cost effective, flexible and timely manner.

At Deloitte, we believe that Technology and Innovation are here to stay. More than that, we believe that we must lead by example to innovate ourselves so that we can help our clients respond to the market disruptions and innovate their businesses most effectively. Over the last couple of years, we have established our credentials in the Innovation and FinTech ecosystems with financial institutions, industry bodies and FinTech/RegTech startups across client strategy, world class research with WEF, and accelerator and incubator programmes.

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