" class="no-js "lang="en-US"> Majority of Financial Services Firms Report Increased Compliance Expenditure – Survey Finds - Fintech Finance
Thursday, March 28, 2024

Majority of Financial Services Firms Report Increased Compliance Expenditure – Survey Finds

The majority (76%) of financial services firms have increased compliance expenditure over the past year, according to the Annual Compliance Health Check Report from SteelEye, the firm behind the first and only truly integrated surveillance solution.

Heightened regulatory scrutiny across financial services last year, as demonstrated in SteelEye’s fine tracker which showed record penalties issued by regulators in 2022, meant that firms were under intense pressure to meet compliance standards. In response, financial firms spent a large proportion of revenue to keep up with the complex regulatory landscape – with nearly a third of firms (27%) claiming that between 21% and 30% of their total expenditure was spent on compliance.

The data adds to the view that compliance teams are struggling to keep up with requirements, as investment in technology to help reduce manual workloads (selected by 38% of firms), and more regulation to comply with (32%), were believed to be the two main drivers of the increased compliance expenditure.

Hiring and keeping the right talent was only selected by 21% of firms, suggesting that compliance professionals are recognising the need to use a vendor to support compliance operations, as regulators become ever-more demanding. This trend is set to continue as more than two-thirds of firms (73%) are expecting to invest more in RegTech over the next 12 months, compared to 44% in 2022, with expectations that some of this investment will go towards external third-party solutions.

With the report also finding that 62% of firms are concerned about traders and portfolio managers taking more risks in a recession environment, investment in compliance will continue to rise as firms look to monitor activity more closely.

The findings come following the scrutiny of governance and risk mismanagement in the wake of high-profile bank failures this year. Against this backdrop, the banking sector is spending the most on technology to support compliance efforts. Sell-side firms – including banks and brokers – are leading in terms of monitoring Microsoft Teams, WhatsApp, and Zoom. 54-62% of banks are monitoring these channels today, with 40-43% having started to monitor them in the last 12 months. This compares to the year before when research showed that only 12-24% of firms, banks and brokers were monitoring these channels.

Commenting on the findings, Matt Smith, CEO of SteelEye, said, “The recent banking failures are going to add further pressure on compliance teams in the financial sector. While our report shows that 2022 saw huge progress in the sophistication of compliance technology, as a result of an increase in investment across the industry, this level of investment will need to continue into 2023 to meet the mounting regulatory pressure that is expected in the fallout of the recent events.”

SteelEye’s second Annual Compliance Health Check Report surveyed 300+ senior financial services compliance and risk professionals about their current compliance concerns, priorities, and spending.

 

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