Cost of Compliance

Deloitte’s Center for Banking Solutions published an interesting study on compliance based on a survey of 20 of the top 50 financial institutions in the U.S. As my friend Mark Macauley (his identity blog) has said to me many times, “compliance is a cost center”. Here are a few excerpts from the study that I doubt are unique to financial institutions….

  1. “As costs have risen, financial institutions appear to have responded more by applying people resources to monitor compliance versus technology resources to manage it. “
  2. “Only 10% of financial institutions reported that compliance information was always effective and 15% that it was always timely.”
  3. Compliance related spending has jumped from 2.83% of net income in 2002 to 3.69% in 2006.
  4. Of compliance spending, 18% was for computing infrastructure (hardware, software, etc) while 60% was for compensation (people presumably).
  5. Overall 95% of the respondents reported that their management and administrative employees were spending more time on compliance than before and fully 40% saying that the time they devote to compliance has increased by 22% to 25%.

Ouch. Talk about an area of opportunity for improvement.

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