More than half of large financial services institutions—including banks and insurers with more than $40 billion in assets—expect to invest at least $200 million on projects to overhaul how they do business to address global structural reform regulations this year, according to a new survey by the global consultancy Accenture. Nearly one-third of those firms expect to spend as much as $500 million.
Accenture’s 2015 Global Structural Reform Study also found that, even with that hefty price tag, less than one-quarter of the respondents are currently fully compliant with key regulations finalized by the Dodd-Frank Act and Basel III.
Global structural reforms (GSRs) are causing many financial institutions to reshape their structure and product mix in order to comply. Three-quarters of respondents said they expect that most trading activity will be moved outside of banks to hedge funds and asset management firms; nearly 63 percent said they plan to reduce the current number of products they offer (63 percent) and nearly half plan to focus more on core competencies within the next two years. While the majority (89 percent) of respondents said that GSR will ultimately increase the industry’s profitability, they also believe that not all institutions will be able to afford the cost of compliance. In fact, more than two-thirds (71 percent) of respondents forecast that small banks may fall out of the market because they might not be able to afford to keep up with regulatory changes.
“Financial institutions cannot afford to adopt a wait-and-see approach in their response to the challenges presented by GSR,” says Samantha Regan, who leads Accenture's regulation and compliance practice. “They need to tackle structural reform with the same bold, strategic thinking that they are using for other industry challenges. First movers can potentially turn this challenge into a competitive advantage with clients and customers drawn to firms with clear business strategies.”
Accenture commissioned the online survey of 131 financial institutions with at least $40 billion in total consolidated assets within a single country (including on- and off-balance-sheet consolidated assets) and offering more than one product in more than one country. The survey was conducted in Latin America, Asia-Pacific, Europe, and North America.