Deloitte Tracks High Costs of Compliance
Wednesday, January 16th, 2008Bank Technology News | Friday, January 4, 2008
Bank spending on regulatory and compliance costs have skyrocketed an average of 87 percent in five years and has begun to outstrip revenue growth for some of the nation’s major banks, according to a new report from the Deloitte Center for Banking Solutions. The survey of compliance, risk and financial officers at 20 of the nation’s top 50 banks estimates that large banks spent an average of $83.54 million each in 2006 on compliance and regulatory costs, compared to $44.78 million in 2002—an 87 percent hike. Those costs aren’t simply matters of size or inflation, according to Deloitte: As a percentage of net income, compliance-related spending has increased from 2.83 percent to 3.69 percent of total costs during that same period.
Much of the direct compliance spending (60 percent) was for staff, with only 18 percent for IT spending – showcasing what Deloitte indicates is the trend to throw more people into the mix than leveraging technology and improving processes.
“Senior banking executives feel that compliance costs have drastically increased in recent years and will likely increase further, given the recent focus on mortgage-lending practices,” says Don Ogilvie, the independent chairman of the Deloitte Center for Banking Solutions. “The major challenge for banks in the coming year will be to manage compliance costs in a more fiscally efficient manner, while maintaining current risk- management levels.”
Deloitte’s findings noted many IT projects to drive revenue or upgrade risk-management technologies were delayed by compliance-related needs.
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