The Compliance Challenge

By Mark Brousseau

If compliance challenges make you feel like a hamster running on a wheel, you’re not alone. Compliance costs grew significantly faster than net income for the financial institutions in a recent survey by the Deloitte Center for Banking Solutions. While compliance spending as a percentage of net income for the financial institutions surveyed were 2.83 percent in 2002, by 2006 it had grown to 3.69 percent, the survey of top 50 banks found. The indirect costs of compliance management are much greater, but more difficult to precisely measure.

The Deloitte Center for Banking Solutions also found that as costs have risen, financial institutions appear to have responded more by applying people to monitor compliance rather than focusing on process improvement and technology to manage it.

For instance, 95 percent of the financial institutions surveyed said their executives were much more involved in compliance management than in the past, with 40 percent saying that the time devoted to compliance had increased by more than 25 percent.

What do you think? E-mail me at m_brousseau@msn.com.