Earlier this year, Bloomberg announced banks trimming compliance people after the $321 billion in fines abate. Then, I saw the headline around MiFID II with Deutsche Bank suffering over this change. The changes are only continuing and increasing in “complication.” It’s NOT better!
In addition, a recent article on UBS predictions projected that the largest banks and brokerages could EACH spend $80-$120 million preparing for MiFID II. This is just for one compliance requirement change.
Instead of innovating like FinTechs, many existing banks are burning through massive budgets and resources trying to keep up with the barrage of regulatory requirements that continue to be put in place following the 2008 global financial meltdown. The challenges associated with compliance are compounded by the fact that many banks often operate without centralized data management, and often lack complete insight into their own organizations, or an overall view of corporate risk.
Compliance Challenges in Banking
To adopt to the explosion of compliance regulations, many banks have been forced to use a piecemeal approach their data management and governance. They often build new procedures, retrofits, and custom apps on top of legacy systems, an approach that primarily involves plastering one point solution on top of another. It’s no surprise that the resulting ad hoc systems are often not able to show consolidated reporting, audit trails, or other required regulatory information since they weren’t purpose-built for compliance.
This ad hoc approach is both extremely expensive and ineffective for banks. In fact, 20 percent of banking IT operations budgets are typically devoted to compliance, and that’s just to keep the lights on and daily operations running.
Tackling the Demands of Compliance
These manual compliance audit processes happen week after week in the IT departments of financial institutions across the globe. It’s become a check-box approach that does not work. For example, banking operations staff hands off a compliance request to the IT department, and an IT professional looks it up in multiple separate tools. She may not be successful in finding the information needed, so she goes back to operations with her status update. And the inefficient cycle continues.
A better solution that ends this repetitive, time- and labor-intensive cycle is to build a platform that enables regulatory compliance as new technologies are implemented – a comprehensive approach that provides needed access, process, and reporting capabilities, all while maintaining 24/7 compliance at all times. This capability is an agile approach to enabling compliance across a sector of a bank. It provides a software product type “always on” like that of a SaaS provider.
A New Approach to Banking Compliance
Hitachi Vantara merges deep technology expertise with decades of financial banking insight to deliver innovative new solutions that help solve these challenges. Hitachi holds more financial technology patents and intellectual property than any other information technology company, and has 44 of the top 50 global banks as valued customers. Hitachi addresses the complex issue of bank compliance processes through a common, secure, data repository framework based on a number of integrated products and services.
Hitachi helps banking customers get control of compliance issues by drastically reducing investigatory time and effort, demanding fewer auditing resources, and quickly satisfying regulatory requirements. As an example, a large global bank located in the Netherlands, leveraged the power of the Hitachi Content Platform portfolio to cut its compliance investigations down from weeks to hours. These dramatic results are repeatable, scalable and can be applied to any bank or financial services enterprise. This approach is not a product approach but an infrastructure platform approach.
The ability to innovate and adapt matters more than ever for banks and brokerages. BUT – IS IT BETTER? Perhaps a little, but it is not fast enough. It is kind of gross to see the estimated costs of MiFID II ranging between $2.5 billion to $3 billion just to simply comply with the rules.
Innovation is a complex animal, but it needs to take a totally different approach than throwing thousands of bodies at it. I am watching the “pipeline of changes” just beginning with MiFID II, GDPR, PSD2, new capital planning, stress testing, FRTB changes, etc. This layered on-top of approach makes it so difficult to achieve any business strategy under this new capital order. What is your bank doing to deal with the increases in capital and people requirements while the tectonic plates of the banking regulations keep shifting – besides cutting off people and diminishing prospects for new business?