Blog: Bearmoor Notes

Thursday, January 8, 2009

Interesting Conundrum - Increased Regulation and Expense Reductions

As the turbulence continues within the financial services industry, compliance challenges are being created.

  • Federal and state regulatory agencies are looking to increase their regulatory influence and the examination process is expected to become more onerous.
  • Financial organizations are closely watching their expenses, especially in areas that are not revenue producing (i.e., operations).

These opposing views will definitely create some unique challenges for both the regulators and the financial industry. The goal is to create a solution that restores confidence, credibility, and growth within the industry.

  • Regulatory red flags will be generated when financial institutions decrease compliance budgets; eliminate staff; reduce training; decrease technology usage, etc.
  • Shareholder and analysts concerns will be brought to light when budgets are missed; revenue expectations are adjusted downward; increased losses; etc.

Currently there is plenty of finger pointing regarding the state of the industry. Both sides will need to work together to provide proper regulatory oversight that allows for renewed growth.

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