Plenty has been said about the growth of compliance costs. Now we have further evidence that compliance spending is rising faster than net income for financial institutions, according to the latest survey from the Deloitte Center for Banking Solutions.
The study, which surveyed surveyed chief compliance officers, chief risk officers and other senior executives at 20 of the top 50 financial institutions in the United States, found that compliance spending as a percentage of net income had grown from 2.83 per cent in 2002, by 2006 to 3.69 per cent by 2006. Overall compliance-related spending increased by an average of 159 per cent from 2002 to 20061. How much do they spend. One financial institution reported compliance spending of nearly half a billion dollars in 2006. Another said that its compliance-related spending had increased five-fold.
It was also taking up more time with 95 per cent saying executives were more involved in compliance management than in the past. It also revealed that 40 per cent said that the time devoted to compliance had increased by more than 25 per cent.
Needless to say, these findings suggest that compliance spending is eating into profits. And it's going to get worse. According to the study, more than half the respondents believed compliance would become more complex over the the next three to five years. Respondents also said that penalties for non-compliance had increased, and 85 per cent expected penalties to continue to rise
It also revealed that 40 per cent said that the time devoted to compliance had increased by more than 25 per cent.
As prospects of a double-dip recession fade, the size and pace of bank failures in 2011 is significantly lower than this time last year. Yahoo! Finance references the FDIC’s failed bank list and notes that 25 banks with $9.9 billion in total assets failed through the first eleven weeks of 2011, whereas 37 banks with $21.6 billion in total assets failed through the first ten weeks of 2010. The rebuilding phase began for banks in 2009, and it continues today. In order to refocus on growing future revenues, banks have de-risked their balance sheets, raised new capital, and aggressively written down bad loans and securities.
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