The size of compliance departments have increased dramatically during the run up to MiFID II’s implementation deadline, but industry insiders expect a significant downsizing as firms complete their migrations to the new regulatory environment.
The largest banks quadrupled the size of their compliance department to where some employ between 10,000 to 15,000 professionals, according to Peter Farley, senior marketing strategist, capital markets at Finastra.
“I would think the banks would be looking to bring those numbers down by half, or even three-quarters, with the opportunity to automate more of those processes,” Farley told Markets Media.
Costs, and not regulations, remain the dominant concern for the established players in Europe and the US as well as the Middle East and Asia to a lesser extent, he added.
Farley noted that peak hiring for compliance teams has already come and gone within Europe as the industry moves closer to the start of the MiFID II regime on January 3, 2018. “We see it come down now,” he said.
One surprising contributor to the eventual compliance department reductions are the regulators themselves.
In late June, the UK’s Financial Conduct Authority reportedly started discussions with the industry regarding making the regulator’s handbook available in a machine-readable format, which would simplify the automation of many compliance tasks while eliminating subjective interpretations of new rules.
“It would allow firms to run it through it through their systems and come out with the answers that the regulators require and when they need to have them,” he said. “There has to be a lot of negotiation between regulators and the banks if this is going to work. But I think it is very encouraging that the regulator is being proactive and is trying to work with banks to make things more straight forward for them.”