Key Points
The compliance function in banks is the nerve-centre that performs a vital role in preserving organizational resilience and stability..
Just as a weak heart can debilitate the body, even result in a sudden demise, so can inept and deficient compliance take a toll on a banks health, with serious implications for the entity as well as the financial sector..
Regulatory expectations of banks went up sharply after the 2008 Global Financial Crisis, the lessons of which inspired reforms spanning the entire spectrum of prudential guidelines, covering both idiosyncratic and systemic risks, with many new variables placed under watch, such as the liquidity coverage ratio, net stable funding ratio, non-risk-based backstop facility or leverage ratio, and too-big-to-fail criteria..
For proper compliance, banks should (i) embrace regulatory technology (reg-tech) to streamline processes and improve compliance efficiency, (ii) foster collaboration on reg-tech and compliance models, and (iii) prioritize capacity building, education and awareness..
On the contrary, collaboration on reg-tech and access to opensource compliance platforms, apps, API systems and best-practice repositories will help spread know-how across the sector and save research costs and efforts, especially for smaller banks, while also creating a pool of tech tools..
