Regulation is Leaving Little Room for Banks to Make Strategic Changes

Banking is the most heavily regulated industry in the world, with 222 financial regulatory bodies globally and hundreds of internal standards in each bank. Although regulation is needed to keep banking customers safe, the surprising amount of business change that is focused on regulatory requirements could be preventing growth and innovation.
84% of financial institutions say regulatory requirements are impeding their ability to adequately fund major strategic changes, according to a survey of nearly 800 executives. This is becoming a bigger issue as the rate of change is increasing due to technology and changing customer demands. When the capacity for change is tight, the implementation of new technologies will often have to be delayed so that regulatory changes can be completed.
Regulation can be seen to impede growth if the capacity and focus required prevent strategic changes being made. 89% of Banking and Capital Markets CEOs see overregulation as a threat to growth and are extremely concerned about the burden it places on the bank. 53% of these CEOs think regulatory change will have a very disruptive impact over the next five years, adding another disruptive force alongside new technology companies for financial services to contend with.
So how can banks continue to grow and innovate while complying to these demanding regulatory requirements?
Evolving Business Models
Banks are evolving their business models to reflect the changing landscape of regulation and innovation. Some banks are learning to use regulation to their advantage and form partnerships and collaborations with Fintechs that can offer new ways of dealing with these challenges.
Centralisation of Data and Compliance
With multiple systems and services operating across different areas of the bank, it can be difficult to get clear data on customers and their activity, making certain anti-fraud efforts challenging. The centralisation of compliance allows for the more advanced use of data to identify abnormal behaviour.
The benefit of having a centralised set of compliance standards is recognised by EU policy as well. The EU’s General Data Protection Regulation (GDPR) that will come into effect in 2018 seeks to strengthen and unify data protection for all individuals within the EU. By harmonising data protection laws throughout all EU states, the GDPR should make it easier for non-European companies to comply with these regulations as well.
Increasing Change Capacity
Increasing the capacity for change will allow banks to continue to make strategic changes while complying with the regulatory changes that need to be made, reducing the impact that this level of regulation will have on their growth. By improving the delivery process, more change can be delivered in the same amount of time, making it easier to deliver strategic change as well as regulatory change.
Avoiding Failed Change Events
The sheer amount of compulsory regulatory change can mean strategic changes can only be delivered in a limited number of change release slots in a year. When issues occur in any kind of change event it can cause it to be delayed, squeezing these limited slots even further. Reducing the risk of failed deliveries through real-time visualisation and better planning allows banks to make the most of their change capacity windows, ensuring they are able to deliver both compulsory regulatory change and a greater amount of strategic change.
Changing requirements and a loss of capacity for strategic changes mean it is more important than ever for banks to ensure that regulatory changes run smoothly. While regulation can create challenges, finding ways to more efficiently use resources and make the most of opportunities to deliver change can reduce these impacts and help banks navigate regulation while continuing to grow.
Cutover enables teams to achieve a 30% increase in capacity by removing repetitive manual tasks. Cutover also provides real-time telemetry to all stakeholders to give greater visibility and control over critical change events. Find out more here.
