THE POWER OF REGTECH: NAVIGATING THE REGULATORY BURDEN

We live in an increasingly fluid regulatory environment, with new regulations continually being enacted and extant rules reformed, resulting in a bewildering landscape for financial services (FS) firms to navigate.

What is more, this landscape is burgeoning. According to Thomson Reuters’ ‘Cost of Compliance 2022: Competing priorities’ survey, during 2021 there was an average of 246 regulatory alerts daily across 190 countries. This equated to 64,152 alerts annually, the second-highest annual amount since 2008.

The survey also reveals that 74 percent of respondents expect to see an increase in the amount of information published by regulators over the next 12 months (50 percent slightly more, 24 percent significantly more), compared to 78 percent in the prior year (48 percent slightly more, 30 percent significantly more). The survey also found a similar trend among globally systemic banks (57 percent slightly more, 14 percent significantly more).

Overall, the survey estimates that regulatory changes have increased by over 500 percent over the past 10 years, with a new regulatory update implemented almost every 10 minutes.

Further evidence provided by UL Solutions shows that, in 2021, an average of 2.4 regulatory changes took effect every day worldwide. In 2022, that average was five per day and rising. Echoing UL’s findings of heightened regulatory change is data captured by FinregE, which found a 30 percent increase in regulation change publications – draft rules, finalised rules, reports, discussion papers and the like – between 2021 and 2022.

At the same time, fines for non-compliance have also risen and become more severe in recent years. The Thomson Reuters report states that, in 2019, the Securities and Exchange Commission (SEC) alone issued 862 enforcement actions, ordering those in violation to pay more than $4.3bn combined. In the UK, the Financial Conduct Authority (FCA) fined companies £224.4m in 2019/20, including issuing its largest ever fine.

Apr-Jun 2023 Issue

Fraser Tennant