The competitive issues facing banks -- including globalization, consolidation and the overall increase in the products and services they offer -- have an underlying regulatory component to them, according to Richard Spillenkothen, head of Deloitte & Touche banking and finance regulatory consulting practice and an adviser in the New York-based consultancy's new Center for Banking Solutions (CBS). As such, it is vital for banks to approach regulation and compliance at the enterprise level, he asserts. But, "How do you put in place an enterprisewide risk management system to look at, identify, monitor and control risk on an enterprise basis across all business lines?" Spillenkothen poses. "This is very complex."
The complexity is compounded because banks have been "solving regulatory problems on a one-off, siloed approach," says Christopher Recor, director of risk technology and operations with Deloitte's banking industry group. "They haven't put silos together in an integrated regulatory framework -- probably because this is seen as a cost center. Also, the software vendors have been approaching compliance in a stovepipe way."
As a result of the complexity, many bankers view compliance as an onerous burden, especially from a technology standpoint. But both Recor and Spillenkothen say banks need to to take a long-term view. "Banks are under the gun to get their compliance plans in place," comments Recor. "But once things settle down, they will see value in what they've done beyond compliance." For example, he explains, some banks are using the rigors imposed upon them with regard to Know Your Customer regulations to enhance their cross-selling and relationship-building efforts.
Of course, "The IT component is critical," says Spillenkothen. "IT systems have to adapt to or accommodate the rapid changes in the banking industry. Systems have to stay current, relevant and consistent with what banks are offering."
He Knows Regulation
Having spent 30 years at the Federal Reserve Board, including 15 years as the director of the banking supervision and regulation division, Spillenkothen, who joined Deloitte in January, knows banking regulation. He says he will be dealing with many of the same issues as he did while serving at the Fed. "One's perspective changes, but many of the challenges and issues a regulator has to deal with are the same as those faced directly by banks," he comments.
According to Spillenkothen, he was hired as a part of Deloitte's efforts to enhance its financial services industry commitment with the launch of the CBS. In addition to Spillenkothen, the firm also named former American Bankers Association president and CEO Donald Ogilvie as CBS chairman. "[CBS] is a forum designed to bring together senior bank officials (former and current), regulators and academics to develop solutions and strategies to deal with banks' competitive pressures," Spillenkothen explains.
A large part of Spillenkothen's role will be to help banks adopt actionable methods to meet regulatory and competitive pressures, he notes. "This is about understanding regulations and remaining competitive while still meeting your growth and performance goals, and shareholder demands," he says. "The center will address practical, real-world issues for banks and develop practical, real-world solutions."