RegTech improves compliance for banks, but also increases costs
RegTech is easing the compliance burden for banks, but it’s not driving down budgets according to recent survey.
Technological solutions are widely used in the industry to comply with regulations like the Bank Secrecy Act, vendor management, Know Your Customers rules and the Community Reinvestment Act. These solutions have promised to reduce paperwork, ease the compliance burden and reduce costs.
However, according to the Bank Director’s 2018 Risk Survey, sponsored by Moss Adams, the costs from technology have actually increased. More than half (55%) of the directors, chief executive officers, chief risk officers and senior executives in the survey believe that technology to improve the compliance function has increased the budget. This compares to just 5% which say that technology has decreased their compliance costs.
The survey was conducted in January 2018 and completed by 224 executives and board members. It examines the risk landscape for the banking industry, including cybersecurity, credit risk and the impact of rising interest rates.
According to the survey, 58% of respondents say that the fiscal year 2018 budget increased by less than 10% from the previous year, and 26% say the budget increased between 10 and 25%. The respondents also report a median compliance budget in FY 2018 of $350,000.
Despite 2018 seeing a wave of regulations introduced, 49% of those surveyed said that compliance was one of the three risks most concerning them. This was second to Cybersecurity, which received 84% of vote.
“Cybersecurity continues to be the No. 1 threat that keeps bankers up at night,” says Al Dominick, CEO of Bank Director. “From year to year in our survey, boards and executives demonstrate a consistent effort to tackle the issue, but it’s hard to stay ahead of cybercriminals—and the industry is well aware of this.”
According to the survey, 69% believe that their bank has an adequate level of in-house expertise to address cybersecurity. In addition, all respondents say their bank has an incident response plan in place to address a cyber incident. However, 37% are unsure if that plan will be effective.
Earlier this month, a separate report found that improving cybersecurity is one of the key business priorities for global asset managers. With the perceived threat of attacks on the up, bolstering cybersecurity operations are a key business priority for 33% of asset managers, according to a report from Osney Media and BackBay Communications.
Copyright © 2018 RegTech Analyst
