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US bank spending on compliance soars - Deloitte

18 January 2008  |  7262 views  |  0 Pound Coin Cash

The latest research from Deloitte shows that expenditure on compliance by US banks has increased an average of 159% over the past five years, but the majority of spending - 60% - goes on staff costs while only 18% is dedicated to technology.

Deloitte says its survey of 20 banking and thrift institutions in the US found that spending on compliance has increased drastically in recent years, and is likely to increase further in light of the recent focus on mortgage lending practices.

But the majority of direct compliance spending went to compensate staff, according to respondents, while only 18% went to capital expenses, mainly IT systems, hardware and software.

Don Ogilvie, the independent chairman of the Deloitte Center for Banking Solutions, says the tendency has been to respond to increased regulations by adding people, rather than by leveraging technology and improving processes,

The way banks have chosen to manage compliance may have added to costs, says Ogilvie.

"It is clear that banks could mitigate rising compliance costs by putting more focus on a new approach to compliance management, one that reduces duplicative - and redundant - processes and builds business cases for more investment in technology solutions," he adds.

However Deloitte says some respondents estimated their institution's IT spending was 10% to 15% higher than it would have been without additional compliance requirements. They noted IT systems designed for monitoring, controls and regulatory policies experienced the most rapid increases in capital investment.

Respondents also reported that IT initiatives designed to drive increased revenue or upgrade risk management had been delayed over the past three years, due to the priority placed on compliance-related projects.

Only five per cent of respondents said increased compliance had led to reduced functional duplication, and 30% of those surveyed claim that duplication had actually increased.

In addition, as many as 95% of respondents said management and administrative employees at their institution were spending more time on compliance than before.

Read Deloitte report on compliance spending here:» Download the document now 3.2 mb (PDF File)

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