Wouldn’t it be great if we, as individuals and organisations, can build more mutually beneficial relationships like that?
Banks have long had an uncomfortable relationship with regulators. Pay /bonus caps, and hefty fines introduced by the FCA are all over the news. In 2014 fines imposed by the FCA for non-compliant practices totalled £1.47 billion (FCA, 2014) – why are banks struggling to keep up?
Banks often associate the concept of “being compliant” with the documentation of key processes, clear accountabilities, and a well defined governance framework. The truth is, while important, these are basic practices that every bank should already have in place. As a wise man once said, “you have to learn the rules of the game. And then you have to play better than anyone else” (Albert Einstein), should banks be looking beyond putting adequate structures in place, and start focusing on what will really drive success, and behaviours, in regulatory compliance? Surely the future winners are the ones who embrace the idea of “proactive compliance”.
Befriend the regulators. Just as the Oxpeckers act as the warning mechanism for approaching danger, regular conversations with regulators can help shed some light to what may be laying ahead. Similarly, banks can help regulators understand key challenges and issues banks face in meeting regulatory requirements. How can banks do this without reinventing an entire new ways of working? Banks could consider extracting value from existing “known” practices– for example, the Skilled Persons Report is typically used as a diagnostic, monitoring, preventive and remedial tool; Banks could engage in regular conversations with regulators post the Skilled Persons Report, where they could highlight and discuss proactive improvements in identified areas of weaknesses.
Focus on customers. Don’t forget, customers are ultimately driving the future of Financial Services. FCA uses “super complaints” (FCA defines super complaint as a complaint made by an approved watchdog on behalf of consumers) as a key input into the prioritisation of issues in risk outlook, and ultimately the creation of new regulations. If banks listen to customers, and design product and services that are truly “customer centric”, then surely the banks would naturally be compliant in the long run. Surely it’s about being “compliant” and avoiding the “complaints”.
How can banks do this, you ask? This leads nicely into my next point:
“Proactive compliance” won’t happen without change in behaviour. Just as our parents and teachers inspire us - leadership needs to be at the forefront of the regulatory agenda. Banks should give the Compliance Function the power to influence the organisation – open access to the Board of Directors and direct influence over key performance indicators of all customer facing and supporting business units. Banks should consider giving greater budget to recruit experienced, highly qualified compliance professionals, to adequately reward employees who consistently demonstrate the right behaviours and values, and to build a leadership team that not only sets the right tone, but lives and breathes “proactive compliance” everyday.
In this multicultural and fast moving society, more organisations are building strategic and mutually beneficial ‘friendships’ or partnerships with those who were not previously thought to be their allies. If innovative organisations such as Google, Apple and Amazon become banks tomorrow, how would they approach compliance? Wouldn’t they take every opportunity to build strong relationships with regulators to gain the edge that big banks don’t currently have?
Isn’t it time, for the Zebra and Oxpecker of the banking world, to start embracing the inevitable?
Regulatory Risk & Compliance
The sponsor for Regulatory Risk & Compliance at Capgemini Consulting UK is Anuj Kumar, Head of Risk and Regulatory Compliance Consulting. Connect with Anuj via his LinkedIn profile here.