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

Most watched


Young advisers envision a radically different business in five years

Fintech and sustainable investing are two factors being watched closely by some of the 2019 class of InvestmentNews' 40 Under 40.


Schwab's Jeff Kleintop: Prep for volatility given China trade uncertainties

China could be considered a developed market in five to seven years , according to Jeff Kleintop, chief global investment strategist, Charles Schwab.

Latest news & opinion

Advisers step up efforts to help clients manage student loan debt

As some Democrats campaign to wipe the slate clean, financial planners focus on limiting the amount students borrow.

Funding for Reg BI, other SEC advice reform efforts denied in Waters amendment

House likely to approve measure that effectively kills rule package, but it faces uphill battle in Senate

Wall Street lashes out at Sanders' plan to pay off student debt with a securities trading tax

Financial pros argue that a transaction levy will hurt mom-and-pop investors along with investment houses.

GPB paid B-Ds and reps steep commissions to sell troubled private placements

GPB paid commissions of 9.3%, or $167 million altogether, on the firm's private placements.

Give us a break, active managers say

Seven portfolio managers share their outlooks for the rest of the year, generally agreeing that it's been hard for active managers to stand out.


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