Newsmakers: Poor Compliance Sows Seeds Of Next Financial Meltdown


By Anita Hawser


Johns: Compliance is key to avoiding another crash

Senior banking and compliance officers surveyed by compliance solutions provider Complinet are already talking about the next financial crisis, which they believe will happen within the next four-and-a-half years. It seems financial markets do suffer from short-term memory loss, and the events of 2008 are in danger of being forgotten.

Aptly titled “The Forgotten Crisis,” Complinet’s survey found that 75% of senior banking and compliance officers across the banking, securities and insurance industries believe the next crisis will happen before 2015. While regulators and policymakers in Europe, the United States and the United Kingdom are implementing new financial regulation in an effort to avert another crisis of the magnitude of 2008’s, almost 80% of those surveyed by Complinet said regulatory reforms alone would be insufficient to prevent another meltdown. Almost 70% said the industry was in danger of being overregulated.

One survey respondent neatly summed up the gloomy mood among compliance specialists: “The continuing lack of company transparency and accountability to the markets and the public makes the possibility of another crisis almost assured.” While 72% believe financial products are becoming less risky, the 28% that believe products are riskier said regulators need to gain a better understanding of the financial markets so they could more effectively monitor firms.

And while the campaign against bumper bonuses has largely been public and politically driven, fueled by the billions in bailout money handed out to the banks, over 70% of those surveyed agree that the existing bonus culture encourages “uncontrollable” risk taking.

Paul Johns, vice president of global markets at Complinet, says the implementation of effective compliance solutions was essential in order to avoid another crash. He adds that financial services firms needed to ensure they have enough compliance resources to navigate through the “regulatory maze” and to reduce their risk of non-compliance.