Regulatory Compliance for Financial Institutions – Industry News

Banks Burdened With Compliance Costs Outsource Home Loans

As banks lose money on mortgages and retreat from the business, PHH Corp. is rushing to cash in. PHH, the biggest U.S. outsourcer of home loans, processes and originates mortgages on behalf of small banks and some of the world’s largest financial firms, including Morgan Stanley and HSBC Holdings Plc. PHH Chief Executive Officer Glen Messina is so convinced he can make money where others can’t that in July he sold the company’s cash-producing fleet management unit and plans to plow the proceeds into mortgages. Lenders are backing away from home loans as an array of new regulations in the aftermath of the housing crash push up compliance costs. Banks lost an average $194 a mortgage in the first quarter, according to the Mortgage Bankers Association. The losses may spur banks to increase outsourcing of home loans by $180 billion a year while keeping their brand name on the mortgage, Messina said on a July 8 call with analysts. [Read more…]  

HSBC wrestles with soaring costs of compliance

Since Stuart Gulliver took over as chief executive of HSBC in January 2011, many areas of the bank have shrunk, including its revenues, employees and the number of countries in which it operates. Even its share price is lower.

But one part of the London-listed bank has grown rapidly: It now has 24,300 staff specialising in risk and compliance, almost 10 per cent of its entire workforce, which has increased about a sixth from three years ago. While it is cutting costs elsewhere, Mr Gulliver said on Monday that the bank spends $750m-$800m a year on its compliance and risk programme, an increase of $150m-$200m from last year and a further rise is expected next year. [Read more…]  

Counting the cost of non-compliance

AIFMD, Basel III, Dodd-Frank, EMIR, Solvency II…There’s a raft of regulations for banks and asset managers to comply with. The cost of compliance is a concern to C-level execs across the board. But the thing that is really keeping heads of operations up at night is the consequence of not complying with the new rules. If processes aren’t adequate and compliant, these execs will be held accountable and risk being hit by hefty fines and even jail terms. [Read more…]  

How Regulators Can Help AML Compliance Officers Do Their Jobs

Anti-money laundering enforcement actions and their underlying investigations increasingly target compliance officers, seeking to hold them responsible when banks fail to play by the rules. Regulators could go further in facilitating compliance with AML requirements by crafting new language in enforcement actions that empowers compliance officers. Compliance officers are a natural target for regulators because they know the rules and may even document risk issues in an effort to address them. In the context of an enforcement action, such documentation may be framed as an admission of guilt. Regulators may also find that the officer has been insufficiently forthcoming in the months before the government recognizes a serious AML violation. Moreover, the Bank Secrecy Act officer is typically presumed responsible for the AML program. [Read more…]  

Bankers too spooked to take risks: HSBC chief

HSBC Holdings PLC Chairman Douglas Flint said the recent raft of fines and lawsuits at banks is spooking its managers from taking normal business risks, as the bank blamed part of a fall in first-half profit on high compliance costs.

HSBC reported a $9.46 billion net profit for the first six months, down from $10 billion in the first half of 2013. Underlying revenue fell 4% to $31.36 billion from $32.7 billion.

Mr. Flint said it is right that global authorities are more focused on banker conduct and financial crime, after “past shortcomings” in the industry. However, he said policy makers need to clarify their expectations for bank staff, so that staff won’t pull back from approving loans or offering customers products simply because of fears that regulators could later find problems. [Read more…]


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