Thomson Reuters’s latest annual survey* of into the cost of compliance and the challenges that banks and other FIs expect to face in the year ahead showed, what corporate treasury departments already know, that the cost of regulatory compliance is growing and the 300 financial service firms are struggling to keep up, see figure below:

Source & Copyright©2016 - Thomson Reuters 

Daily regulatory alerts

Thomson Reuters tracking of regulatory alerts showed that there are now 200 alerts/business day which is a 27% increase in alerts in 2015:

Source & Copyright©2016 - Thomson Reuters 

Personal liability

60% of the respondents expect that personal liability for regulatory compliance will grow (16% expect it will grow significantly) in 2016. Not surprisingly, the pressure from Bailey and Lagarde where they explained exactly what they want and expect:

• Christine Lagarde - managing director, International Monetary Fund - speech on ‘Ethics and Finance: Aligning Financial Incentives with Societal Objectives’ in May 2015 where she said,  “Ultimately, we need more individual accountability. Good corporate governance is forged by the ethics of its individuals. That involves moving beyond corporate ‘rules- based’ behavior to ‘values-based’ behavior. We need a greater focus on promoting individual integrity. In the Aristotelian tradition, virtues are molded from habit – developing and nurturing good behavior over time.”
• Andrew Bailey, chief executive, UK Prudential Regulation Authority, in a speech March 2016 said, “Earlier this month, we introduced the new Senior Managers Regime. The aim of this regime is to establish clear responsibilities for senior managers, including chairs of Board Committees. This is not to create new responsibilities, but rather to be clear on what those responsibilities are, and then to supervise to hold individuals to those responsibilities. In the previous regime, we had too many examples of individuals shirking their responsibilities. My strong view is that senior figures cannot delegate responsibilities. We will then direct our supervision to support this new regime operating effectively.” 

Use of outsourcing in regulatory compliance 

The survey showed that some 25% of financial service firms outsource at least part of their compliance processing.

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* ‘Cost of Compliance 216’ - survey of 300 financial service firms world-wide 

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CTMfile take: There are important implications for corporate treasury departments from this survey: 1) regulatory compliance admin is going to increase, 2) key staff in corporate treasury departments will probably become personally liable for regulatory compliance, and 3) corporate treasurers need to consider outsourcing some or most of the regulatory burden, as it may be the only way to survive because the pressure of “doing more with less” is not going away.