Bank-compliance costs soar, says study

Jan 14, 2008 @ 3:44 pm

By Sara Hansard

Compliance costs at some of the nation’s top banks have grown significantly faster than net income, according a survey of 20 of the top banking and thrift institutions released today by the Deloitte Center for Banking Solutions.

Compliance spending grew 159% on average from 2002 to 2006, according the report, Navigating the compliance Labyrinth: The Challenge for Banks.

The Deloitte Center for Banking Solutions is part of accounting firm Deloitte & Touche USA LLP, both headquartered in New York.

As a percentage of net income, compliance spending increased to 3.7% in 2006 from 2.8% in 2002, the report found.

Banks spent an average of $83.5 million on compliance in 2006, an 86% increase from $44.8 million in 2002.

“Senior bank executives feel that compliance costs have drastically increased in recent years, and will likely increase further given the recent focus on mortgage lending practices,” Don Ogilvie, the independent chairman of the Deloitte Center for Banking Solutions, said in the release about the report.

Banks could mitigate rising compliance costs by focusing more on reducing redundant processes and investing in more technology, the report concluded.

Banks have managed increased compliance obligations by adding people rather than leveraging technology and improving processes, Mr. Ogilvie said.

“Banks must re-examine their approach to resource allocation,” he said.

Sixty percent of compliance spending went to compensate staff, while only 18% went to capital expenses such as information technology systems, the report said.


What do you think?

View comments

Recommended for you

Featured video


Why advisers are pessimistic about the economy

Deputy editor Bob Hordt and senior research analyst Matt Sirinides discuss a recent InvestmentNews survey of advisers, most of whom see a recession ahead before the next presidential election.

Latest news & opinion

John Bogle, Vanguard founder, dies at 89

The pioneer of low-cost, passive investments died of cancer.

10 biggest breakaways of Q4

Echelon Partners lists the 10 biggest adviser moves out of wirehouses during last year's final quarter.

6 biggest RIA acquisitions of 2018

As M&A involving registered investment advisers hit another record last year, these six deals topped the list

Anatomy of an annuity buyout offer

Readers are invited to comment on whether the columnist should keep or ditch her Ohio National VA contract

Factions emerge in OneFPA overhaul

Critics fear the FPA is trying to take money and power from local chapters, which officials and proponents call overblown.


Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting It'll help us continue to serve you.

Yes, show me how to whitelist

Ad blocker detected. Please whitelist us or give premium a try.


Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print