Financial services

Regulation is Leaving Little Room for Banks to Make Strategic Changes

3 minute read

Banking is the most heavily regulated industry in the world. There are 222 financial regulatory bodies globally and hundreds of internal standards in each bank to keep customers safe. The surprising amount of business change 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 is often delayed for regulatory changes.

Regulation can 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.

So how can banks continue to grow and innovate while complying with 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 forming partnerships with Fintechs that can offer new ways of dealing with these challenges.

Centralization 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 centralization of compliance allows for the more advanced use of data to identify abnormal behavior.

EU policy recognizes the benefit of having a centralized set of compliance standards as well. The EU’s General Data Protection Regulation (GDPR) that came into effect in 2018 seeks to strengthen and unify data protection for all individuals within the EU. By harmonizing data protection laws throughout all EU states, the GDPR should also make it easier for non-European companies to comply with these regulations.

Increasing Change Capacity

Increasing the capacity for change will allow banks to continue to make strategic changes while complying with regulations, reducing the impact that this level of regulation will have on their growth. By improving the delivery process, they can deliver more change in the same amount of time, making it easier to deliver strategic change and regulatory change.

Avoiding Failed Change Events

The amount of compulsory regulatory change means there is a limited number of release slots for strategic changes. When issues occur in any change event it can cause a delay, squeezing these limited slots even further. Reducing the risk of failed deliveries through real-time visualization 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.

It is more important than ever for banks to ensure that regulatory changes run smoothly. Finding ways to deliver change more efficiently can reduce impacts and help banks navigate regulation while sustaining growth.

Cutover enables teams to achieve a 30% increase in capacity by removing repetitive manual tasks. Cutover also provides real-time visibility to all stakeholders to give greater control over critical change events. Find out more here.