More than 80 percent of financial institutions are failing to capitalise on regulatory change, according to new research from GFT.
Although 95 percent of respondents agreed that they operate in ‘the new normal’ – a constant state of regulatory change – 82 percent are not capitalising on it to drive strategic investment and business change.
The research project was aimed at understanding the investment banking community’s attitude towards the environment of regulatory change. More than half, 53 percent, said they still regard regulatory projects as a box-ticking exercise.
Although 89 percent of respondents said the ‘tipping point’ in attitude and approach passed more than two years ago, a massive 86 percent said they still use tactical ‘work-arounds’, or short-term solutions.
Most agreed that regulatory change has increased focus on compliance, rather than driving innovation, however 53 percent said regulation has helped drive consolidation of their business functions.
Many organisations have been able to make better business decisions based on the data provided by reporting requirements – 85 percent of respondents said this was the case. Only 55 percent, however, said they reassess their business with every new regulatory change.
Also, while 85 percent of firms said they measure the impact of regulatory change, only 48 percent of these said they act upon the findings.
Gareth Richardson, managing director for the UK at GFT, said: “Banks realise that being aware of, and prepared for, regulatory change is the only way to effectively manage it.”
He added: “In order to succeed in ‘the new normal’, banks need to fundamentally change their operating models, and be flexible to the deluge of new regulatory change being imposed on them.”
Joan Carles Fonoll, managing director for GFT in the US, pointed out that the research shows how different jurisdictions approach regulation differently.
He said: “In the US, for example, regulations tend to be more prescriptive, whereas in Europe they are usually subject to interpretation by the organisation in question. This is evidenced in the research, whereby US banks tend to view regulation more from a compliance perspective, rather than as a driver of consolidation and innovation.”
GFT surveyed 66 organisations including global and domestic investment banks, as well as central counterparties from the UK, Europe, North America and Asia.
Image: Shutterstock 