Compliance failings continue to dog banks

Compliance failings continue to dog banks

Banks across the EU are failing to take their compliance duties seriously, says the European Central Bank, which has identified endemic weaknesses in governance, staffing and policy implementation.

Reporting back from reviews conducted by Joint Supervisory Teams (JST), the ECB remarks that despite some improvements, banks across the region still need to strengthen the oversight of the compliance function.

It points to banks appointing chief compliance officers from legal or financial risk departments who continue to hold responsibilities in their normal day jobs.

States the ECB: "As an overarching principle, the chief compliance officer needs to devote sufficient attention to compliance and should therefore be dedicated to the role on a full-time basis."

Inadequate staffing is also an issue: "Despite a slight increase over the past few years, the staffing of some banks’ compliance teams remains too low to cope with any increase in compliance-related workload or challenges."

Other shortfalls have been identified in reporting lines, senior management indifference to the effectiveness of the compliance function, and the quality of IT tools.

"Some recent incidents have shown that a weak IT infrastructure for compliance monitoring - for example alert systems - could make it more difficult to identify risks," states the ECB. "In this respect, recent advances in IT provide an opportunity to make compliance functions more efficient."

The central bank says it will continue to press banks to enhance their compliance frameworks and perform further on-site inspections and deep dives on this topic over the coming months.

"Strengthening banks’ compliance frameworks may require a change of mindset for some banks," states the ECB. "This means setting the right tone from the top, defining clear accountability for compliance, creating incentives to promote a sound compliance culture and giving the compliance topic the importance it deserves and needs."

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