A proactive response to regulation can boost the competitiveness of financial institutions, according to new research

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Press release

Press enquiries: Joanne McKenna: +44 (0)20 7576 8188 or [email protected]

For immediate release: Wednesday, June 29th 2011

A proactive response to regulation can boost the competitiveness of financial institutions, according to new research

Seven in ten say proactive compliance can create a competitive advantage.

A wave of financial regulation following the meltdown of 2008-09 is sharpening the focus of European financial companies on their relations with regulators and on their overall approach to regulation itself. Many financial services companies see the wave of new rules as an opportunity to overhaul their approach to regulation and to make it more proactive, according to a new survey conducted by the Economist Intelligence Unit and sponsored by Sybase.

The study, titled Compliance and competitiveness, is based on a survey of 160 Western European financial services firms, including companies in investment management; investment banking; commercial, corporate and retail banking; wholesale capital markets operations; and hedge funds. More than half (51%) of the companies surveyed have global assets of US$75bn or more. Nearly half (48%) of respondents are C-level executives or Board members.

The research produced the following key findings:

· Effective regulatory compliance benefits businesses across a wide range of performance metrics. Among respondents 69% say that proactive compliance can be a source of competitive advantage. Survey respondents who consider their institutions to be effective at using compliance as a source of competitive advantage derive a broad range of benefits from this more proactive approach. They have more effective risk management, better business controls, and also enjoy an enhanced reputation with customers, investors and rating agencies. They are also much less likely to suffer a negative impact on their revenue and profitability from forthcoming regulation.

· Financial institutions that undertake only the minimum compliance measures will be at a disadvantage relative to those that take a more proactive approach. Adopting a “bare bones” approach to compliance is a false economy. Our survey shows that, while it may save money in the short term, it stores up problems for later. Respondents who do only the minimum to achieve compliance spend more time and resources on regulatory activities than those who take a more proactive approach. They are also less effective at understanding the impact of regulation on their business, find it harder to deal with compliance breaches and are less able to use compliance as a source of competitive advantage.

* The increased costs of compliance will require financial institutions to look carefully at how they structure and implement compliance activities. Dealing with the high costs associated with regulation will encourage companies to think differently about how they co-ordinate and manage their compliance activities. Currently, this is an area of weakness for many institutions. Fewer than half of respondents say that they are effective at co-ordinating individual compliance projects, and fewer than 40% say they are effective at maximising the efficiency of the compliance process. Forward-looking institutions are addressing these issues by improving co-ordination between disparate projects and using technology to streamline and facilitate the process. They are also exploring the integration of regulatory risk management into broader enterprise risk-management strategies.

· A more efficient approach to compliance minimises regulatory risks. Respondents who run an efficient compliance process are much less likely to suffer a negative impact from gaps or failures in regulatory risk management than those that are less efficient. They are less likely to have encountered increased regulatory scrutiny from authorities, and much less likely to suffer reputation damage due to compliance issues.

Compliance and competitiveness

is available free of charge at: www.eiu.com/sponsor/sybase/fs-regulation

Press enquiries:

Joanne McKenna, Press Liaison, +44 20 7576 8188; [email protected]

Aviva Freudmann, Project Director, +49 69 717188 162 [email protected]

Notes for editors:

Compliance and competitiveness is an Economist Intelligence Unit report, sponsored by Sybase. The study is based on a survey of 160 executives of large European financial companies, carried out during February and March 2011. The online survey was supplemented by in-depth interviews with 12 experts in the topic of risk management and regulatory compliance in financial services companies.

About the Economist Intelligence Unit

The Economist Intelligence Unit (EIU) is the world’s leading resource for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies, government agencies, financial institutions and academic organisations around the globe, inspiring business leaders to act with confidence since 1946. EIU products include its flagship Country Reports service, providing political and economic analysis for 195 countries, and a portfolio of subscription-based data and forecasting services. The company also undertakes bespoke research and analysis projects on individual markets and business sectors. More information is available at www.eiu.com or follow us on www.twitter.com/theiu

The EIU is headquartered in London, UK, with offices in more than 40 cities and a network of some 650 country experts and analysts worldwide. It operates independently as the business-to-business arm of The Economist Group, the leading source of analysis on international business and world affairs.