Financial institutions that look for opportunities in compliance rather than resign themselves to it can position themselves ahead of the competition. The energy they put into understanding the impact of new regulations on their businesses, customers and risks can be used to drive operational changes.

1. A Deloitte perspective on how financial institutions
can move forward in a regulated world
Seizing the regulatory
opportunity

2. Canadian financial institutions weathered the most
recent global financial crisis better than most.
We emerged
relatively unscathed.

3. Despite that record, Canada’s banks, insurers and other
financial institutions (FIs) are subject to the lasting impact
of the crisis.
Since 2008, Canadian
and foreign regulators
have introduced a tidal
wave of new rules.

4. Financial institutions worldwide
have scrambled to keep up.
They have responded to this
wave of regulations by making
significant investments in their
risk, capital management and
compliance infrastructures and
by taking steps to strengthen
their organizations’ risk culture.

5. No one can dispute the ultimate intent of these
post-crisis regulations. It’s hard to argue against
protecting depositors and policyholders and
ensuring the soundness and stability of the global
financial system.
But it comes at enormous cost.
In people, technology, infrastructure, time.
And perhaps, most of all, opportunity.

6. Because while Canada’s regulatory environment proved
it works very well during times of crisis, the question
now is whether it creates a relative disadvantage
for Canadian FIs during times of growth.

7. The risk – from either overregulation or overreaction
to regulation – is that FIs will retreat from global
commerce and focus on domestic markets.
Such a pullback would curtail the global
flow of capital and, with less money
available from top-tier institutions,
innovation will slow or be stifled in
some sectors. Shadow banks and other,
less regulated institutions may then
step in to fill the void.

8. It’s time for an attitude change.

9. Certainly regulation can be a
burden, but it’s also something else:
Opportunity.
It’s time to look at compliance –
and the regulatory environment –
in a new way. A strong compliance
effort, rooted in a deep understanding
of the regulations themselves, can
potentially help organizations
competitively differentiate themselves.

10. In building stronger regulatory, compliance,
risk management and audit capabilities, FIs
are gaining important new business acumen.
Here are five ways FIs can take
advantage of the new regulatory
reality to drive organizational change,
efficiency, effectiveness and growth.

11. Use compliance to drive
new ways of doing business.
Simply collecting information that is required by regulators
isn’t enough. Smart organizations will develop an in-depth
understanding of what the regulations mean. Realizing
the implications better than the competition is an avenue
for offering innovative products that others will not have
thought of.
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12. Focus on capital efficiency,
not just capital sufficiency.
In the U.S. and Europe, ensuring capital reserves are
sufficient to prevent sudden collapses or near-collapses
means FIs have less capital available to invest in growth
opportunities.
These challenges have forced many institutions to take
a long, hard look at which business lines to continue
and which to abandon.
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13. By contrast, the global crisis didn’t affect Canadian FIs
to the same extent as many of their global peers. As
such, they didn’t re-evaluate which capital-intensive
businesses still made sense.
Regulatory headwinds now should force
Canadian FIs to examine their books and
decide if they should continue business-
as-usual or turn their focus to more
fee-based services, like wealth management,
that don’t demand disproportionate
amounts of scarce capital.

14. Push compliance into – and throughout –
the business.
Traditionally, FIs put compliance in its own “box,” separate
from normal business and with little engagement between
business and compliance units beyond the bare minimum.
This limited the opportunity for these groups to work
together.
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15. Integrating compliance into everyday work frees
up the resources and improves overall compliance.
It also enhances the opportunities to identify
regulatory-enabled initiatives.

16. Get ahead of the regulations.
Embedding compliance increases the chances for
insight into how regulations will affect customers,
product offerings and business models.
Doing so can prepare FIs to adapt before regulations
come into force. This may result in a powerful
first-mover advantage on new offerings.
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17. Work with the regulators.
Remember: FIs and their overseers share a common
goal. The recognition by Canadian FIs of this fact was
a key driver of Canada’s relative stability through the
downturn.
It also means there exists a respectful and productive
working relationship – a stark contrast to some other
jurisdictions.
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18. This is an opportunity FIs can seize
by helping regulators anticipate and
mitigate risks.
We encourage FIs to communicate
their insights and ideas before issues
occur and to work with regulators
to develop mutually satisfactory
solutions before they’re needed
rather than after.

19. And remember,
Don’t be complacent.
The world has changed since the financial
crisis began. Governments and regulatory
bodies will play an increased role in
financial services for the foreseeable
future – we simply won’t be returning
to the pre-crisis regulatory environment.

20. Engage regulators and share insights.
Shape the regulatory agenda and
reap the benefits for years to come.

21. For more information
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