COMPLIANCE, PROFIT AND MARKET STABILITY

With the Parliamentary Commission on Banking Standards having dominated the Chancellor’s Mansion House Speech in June, the question of how stringently and how soon the Commission’s recommendations will be implemented continues to hang over the industry. While the media did its best to paint the Commission’s report as a momentous change in the regulatory climate, the truth is more prosaic. Financial sector regulations have been in a constant state of flux since 2008 – one aspect of that is the obvious desire of governments to ensure that the events of that time are not repeated, and that their ongoing effects are ameliorated. However, another is the simple fact that technological advances have made the enforcement of better regulation a reality.

financial meeting

While there is some truth in the argument that increased regulation has the potential to hamper the industry’s recovery, it is nonetheless a relatively small burden compared to the trials it has been through of late and it is important to remember that new regulations are ultimately aimed at increasing the industry’s resilience to systemic shocks. That is of benefit to the wider economy as well as the banking sector, and the intention ought to be welcomed.

Moving from the broader economy to specific institutions, what does this mean? The challenge for financial organisations is to turn the data recording and analysis requirements of Mobile Phone Recording Regulations, and the trade reconstruction requirements of the Dodd-Frank Act in to a strategy, which has a positive effect upon the business as a whole. The technology now available to capture, record and analyse communications around the trade in financial products is far more advanced than that available even five years ago. In many cases, the sort of trade reconstruction capabilities stipulated by incoming financial regulation would have been technologically impossible and financially impractical a few years ago. The various providers to the financial services industry have, in that time, done a great deal to tackle the objections voiced by the industry when such stringent recording requirements were first mooted.

Robert Simpson

For example, mandatory recording of calls made over mobile phones was delayed as the technology available was deemed inadequate and, even once it had been introduced in the UK; its introduction was a rocky one. Even the most modern systems may not be perfect, but much progress has been made in eliminating the connection delays and unreliable retrieval that dogged the earliest implementations of this technology. We may be some way yet from a perfect solution, but the technology does exits to unobtrusively collect and store all forms of communication both within and without a company, and then to analyse it.

Markets are global. However, regulators are failing to act in a way which recognises this fact.  What’s needed is a strong and coherent commitment from regulators to a specific global regulatory framework and a roadmap for how that might evolve to keep pace with the communications technologies that finance professionals use in the course of their work. That will allow financial services companies to invest in compliance with confidence. Today, the patch work of regulations and the lack of a consistent global approach are causing confusion. This is impacting not only the timing but the desire to invest in new technologies. A consistent global approach would accelerate technological innovation by encouraging further investment and more competition, which would produce enhanced and more cost effective solutions.  Such a development would accelerate the extension of solutions used today to solve compliance related issues into areas of trading floor productivity and profitability.

Robert Simpson, Vice President Global Financial Compliance, Verint

With the Parliamentary Commission on Banking Standards having dominated the Chancellor’s Mansion House Speech in June, the question of how stringently and how soon the Commission’s recommendations will be implemented continues to hang over the industry. While the media did its best to paint the Commission’s report as a momentous change in the regulatory climate, the truth is more prosaic. Financial sector regulations have been in a constant state of flux since 2008 – one aspect of that is the obvious desire of governments to ensure that the events of that time are not repeated, and that their ongoing effects are ameliorated. However, another is the simple fact that technological advances have made the enforcement of better regulation a reality.

financial meeting

While there is some truth in the argument that increased regulation has the potential to hamper the industry’s recovery, it is nonetheless a relatively small burden compared to the trials it has been through of late and it is important to remember that new regulations are ultimately aimed at increasing the industry’s resilience to systemic shocks. That is of benefit to the wider economy as well as the banking sector, and the intention ought to be welcomed.

Moving from the broader economy to specific institutions, what does this mean? The challenge for financial organisations is to turn the data recording and analysis requirements of Mobile Phone Recording Regulations, and the trade reconstruction requirements of the Dodd-Frank Act in to a strategy, which has a positive effect upon the business as a whole. The technology now available to capture, record and analyse communications around the trade in financial products is far more advanced than that available even five years ago. In many cases, the sort of trade reconstruction capabilities stipulated by incoming financial regulation would have been technologically impossible and financially impractical a few years ago. The various providers to the financial services industry have, in that time, done a great deal to tackle the objections voiced by the industry when such stringent recording requirements were first mooted.

Robert Simpson

For example, mandatory recording of calls made over mobile phones was delayed as the technology available was deemed inadequate and, even once it had been introduced in the UK; its introduction was a rocky one. Even the most modern systems may not be perfect, but much progress has been made in eliminating the connection delays and unreliable retrieval that dogged the earliest implementations of this technology. We may be some way yet from a perfect solution, but the technology does exits to unobtrusively collect and store all forms of communication both within and without a company, and then to analyse it.

Markets are global. However, regulators are failing to act in a way which recognises this fact.  What’s needed is a strong and coherent commitment from regulators to a specific global regulatory framework and a roadmap for how that might evolve to keep pace with the communications technologies that finance professionals use in the course of their work. That will allow financial services companies to invest in compliance with confidence. Today, the patch work of regulations and the lack of a consistent global approach are causing confusion. This is impacting not only the timing but the desire to invest in new technologies. A consistent global approach would accelerate technological innovation by encouraging further investment and more competition, which would produce enhanced and more cost effective solutions.  Such a development would accelerate the extension of solutions used today to solve compliance related issues into areas of trading floor productivity and profitability.

Robert Simpson, Vice President Global Financial Compliance, Verint