Intended to offer compliance professionals technical and behavioural training that will put customers and clients at the heart of the decision-making process the academy will offer professional training to graduates, leadership master classes to senior staff and mentoring for traders and others.
Barclays, which reportedly employs 2,100 compliance staff, is not alone in spending huge amounts on compliance. US investment bank J.P. Morgan recently announced that since the start of 2012 it had expanded its global compliance team by 13,000 or 5% of its workforce. Citigroup employs some 30,000 and expects to hire 2,000 consultants. That's close to 13% of headcount. Remember, staff are just one visible measure of the cost of compliance. The true cost reaches deep into all areas of an organisation, is rising inexorably and acts as a significant drag on returns on equity and competitiveness.
"Our regulatory costs are often the highest among our top global competitors"
A recent article in the London Evening Standard raised the prospect that this is not just a cyclical blip in response to the credit crisis but more a secular trend of the type that followed the 1929 crash. New laws introduced then included the US Glass-Steagall Act of 1933 that was only unwound after 66 years. We may still be closer to the start of a period of ‘regulatory austerity’ than the end. The same article quoted London’s annual compliance costs as reaching £5 billion, the same as the capital cost of the Olympics. But without the ongoing economic benefit of the infrastructure. Our regulatory costs are often the highest among our top global competitors.
Rapid growthThe rapid growth of any industry introduces risks that are easy to overlook in the heat of the moment and there is no reason to suspect this will be an exception. A quick glance at the web finds long lists of compliance jobs that need filling quickly, with companies outbidding each other as they continuously replace departing staff and seek out new recruits. Salaries continue to rise as companies scrabble to find enough people not only to implement current regulatory requirements but also to monitor a perfect storm of discussion papers, consultation papers and new regulations. High staff turnover has become common, not only adding to direct costs but lowering productivity as new staff are integrated and trained. Nor are our regulators immune: A two-year stint can make an otherwise uninspiring CV stand out from the crowd.
Compliance consultancy is also growing rapidly and for small firms offers a very practical way to keep costs manageable, indeed the FCA website goes as far as listing what directors should look for when appointing a consultant – while reminding them that responsibility and accountability always lies with the approved person rather than the consultant.
Out of touch with reality?Such rapid growth across the industry suggests we need to be more alert to what makes a good compliance professional or regulator. The CISI is one of many institutions offering relevant courses and qualifications. But courses and academies can only go so far. With compliance and regulation playing such a pivotal role in what is ultimately a commercial enterprise we must not ignore the benefits that hands-on experience with customers, clients, products and services provides. Today’s career politicians are frequently criticised for their lack of experience outside Parliament and being out of touch with reality. Are we in danger of doing the same?