With remediation, regulation, bank levies and criminal proceedings, the focus of banks has been distracted. Unsurprisingly the shift in hiring front office trading and sales functions have been restrained as they deal with these considerations. Additionally, regulatory changes in recent years have caused a strain on internal resources and management consultancy spend with the diversion of resource and capital away from business and revenue generating roles, into regulatory, risk and front-office control positions.
Current and pending regulatory papers, such as MiFID II and Dodd-Frank have meant that Heads of Trading and front office COOs are under constant pressure to respond quickly to regulator demands. They need to ensure that their departments are compliant with new rulings and change aspects of their core business accordingly, under cost pressures in a highly competitive market. Increasingly, we are told by Heads of Trading that their focus has shifted from product enhancement, new business generation and facilitating high quality trading and client service, to compliance and regulation. In some cases 50% of their time is now taken up with regulatory issues and ensuring business areas are compliant.
“Regulatory considerations are increasingly a core part of business strategy. Key regulations today are impactful in areas such as capital allocation, transparency in illiquid markets, and conduct matters such as the MiFID II inducements regime and how it affects advisory and research services.” – Head of Market Structure Strategy EMEA – Tier-One Bank
We have seen a significant increase in demand for regulatory officials reporting to front office business heads who are under pressure to navigate regulations and help relevant business units pre-empt necessary changes and future proof the model. These functions are now usually performed by COOs and Business Managers and are an additional headcount. As such, appropriately skilled candidates are in high demand, seeking higher than normal compensation levels.
We have partnered with clients to provide an immediate resource pool of experienced consultants and interims who are experts in building front office risk and control frameworks as well as advising the business on options for their market structures. Business heads have historically turned to management consulting firms to provide oversight and implementation of a new regime. Coupled with the increase in experienced resources required, cost pressure is leading to alternative ways to deliver this change being sought.
Additionally, the independent consulting market has developed markedly over the last five years and now offers a reputable and credible solution. While interim consultants are also encouraged by the option to work on an agile basis, be accountable for delivery and provide domain expertise. These items are alleviating concerns when considering moving away from the traditional consulting model.
Increased regulation is affecting the whole of the banking sector. Anticipating these changes and preparing for them is vital to the success and continuity of financial institutions, but it is not always feasible to do so effectively while carrying out the day job. Front office leaders are now realising that they are spending so much time dealing with regulatory issues, they hardly have time to service their clients.
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