Top 100 firms paying out £28bn on red tape

Published on Sunday 11 May 2008 21:35

THE world's leading 100 financial institutions have increased their expenditure on regulation and compliance by more than 30 per cent in the past three years, a new report has revealed.

According to an investigation by Deloitte, the business advisory firm, the financial big-hitters spent an estimated 28 billion ($56bn) in 2007 complying with the ever-growing burden of regulation and red tape.

Last night the firm warned that the cost of regulation had yet to peak and predicted that the bill for "governance and control" for the globe's top 100 could hit 50bn ($100bn) by 2010.

The report, entitled In Control?, suggests that investment in regulation and compliance can only be fully effective if institutions connect their risk management and controls, and the governance of the two, into a "holy trinity".

Chris Gentle, head of research at Deloitte, said: "A prime feature of the recent losses incurred by major banks in the credit crunch was the inability to link risk and control factors together.

"Financial institutions are always seeking to find and sustain the correct balance between risk and reward, but this lack of triangulation between control, risk and governance is, in most cases, a missing link which needs joining up."

The report recommends that institutions should stop viewing regulation as an unavoidable burden and consider compliance and competitive advantage together.