Survey reveals that financial services industry is ‘over-optimistic’ on compliance

Financial services companies are continuing to under-estimate the compliance challenge facing the sector, according to new research.

Despite ongoing changes to existing regulations and the introduction of new legislation, the survey reveals that more than a quarter of organisations in the financial services industry believe they are fully compliant. Only two per cent of respondents admitted that they were uncertain of their ability to comply with the most important regulations, while the remaining 71% stated that projects were underway and that they would meet the deadlines.

Simon Gay, Consultancy Practice Leader at Computacenter, commented: “Compliance is not something you can achieve and then forget about – compliance is an ongoing process which requires a lot more than just ticks in the right boxes. These findings reveal that financial services companies are being over-optimistic about their ability to achieve compliance, and the challenges that they will face in the future.”

The survey, which was carried out by Finextra Research among financial services organisations in the UK, also reveals that many IT systems are failing to meet the demands of compliance. A sizeable 39% of respondents admitted that their current IT infrastructure is doing a poor job or needs improving to support regulatory requirements. It is not surprising then that nearly 60% of financial services companies are introducing new systems to help meet their compliance obligations.

Peter Stafford, IS Director at Bank of Ireland in the UK, commented: “Compliance with legal and regulatory frameworks is one of biggest challenges currently facing IT departments in the financial services industry. Technology has a massive role to play, and we have made a number of investments to help make compliance easier and less expensive. For example, we have deployed imaging and tools that facilitate the extraction of information from systems, and taken steps to ensure we have access to scalable management information databases.”

According to the research, which was sponsored by IT services company Computacenter and Sun Microsystems, financial services organisations are now taking a ‘big picture’ approach to compliance, which is a positive move for the industry. More than 80% of respondents cited that their organisations were looking for common areas when planning new compliance initiatives to avoid duplication of effort.

Ensuring compliance is no easy feat as the legal landscape is constantly changing. For example, only last month the US Securities and Exchange Commission changed the deadline for Sarbanes-Oxley reporting requirements, and at the end of September long-awaited consumer credit regulations will come into force in the UK. On top of this, there are the recent developments in data protection, risk management and outsourcing, which all impact the financial services industry.

“Industry best practice is at the heart of much of the new legislation and regulations, and, as a result, compliance can deliver many more benefits than just keeping a company on the right side of the law,” added Gay. “By combining compliance efforts with service improvement programmes, financial services companies can ensure that IT systems and processes, such as email archiving and disaster recovery, are also in line with the needs of the business.”