Regtech rising: Automating regulation for financial institutions

Starling Team
By Kevin Petrasic, Benjamin Saul and Helen Lee

Financial institutions and regulators that harness the opportunities and manage the risks of adopting regtech solutions will reap big rewards.

Regulatory compliance is timeconsuming and expensive for both financial institutions and regulators. The volume of information that parties must monitor and evaluate is enormous. The rules are often complex and difficult to understand and apply. And much of the process remains highly labor-intensive, when even the most automated solutions are often incompatible with other systems and, even today, most still depend heavily on manual inputs.

As a result, costs have risen significantly for financial institutions in recent years. According to Federal Financial Analytics, a policy analysis firm, the six largest US banks spent US$70.2 billion on compliance in 2013, twice the US$34.7 billion spent in 2007.1 In 2015, the Financial Times estimated that some of the world’s largest banks each spent an additional US$4 billion a year on compliance since the financial crisis.2

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Wells Fargo shows standards don’t matter if company culture is broken

Starling Team
Jeffrey Kupfer and Stephen Scott

Seated at the witness table of the Senate Banking Committee, Wells Fargo CEO John Stumpf found himself in a place no bank CEO ever wants to be. The leader of one of the nation/s largest banks was grilled for more than two hours by Senators united in rare bipartisan unity by outrage over revelations that Wells Fargo employees improperly opened accounts without their customers’ knowledge. Today, other CEOs are likely asking themselves how to avoid the same fate.

As Stumpf would no doubt agree, corporate culture is a bottom-line issue. When culture breaks down within an organization, the consequences can be dire. It is estimated that Wells Fargo has seen some $20 billion in its market value vanish since the scandal that brought Stumpf to Capitol Hill was publicized widely in the press. But fines and lost shareholder value are only the beginning. The bank’s broken trust with customers will take years to repair.

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Starling Featured at CEB Reimagine HR Conference

Starling Team

Starling, an applied behavioral science technology startup, was one of five companies featured by the Corporate Executive Board (CEB) Ventures group at the CEB’s ReimagineHR Conference in Miami on September 7-9. ReimagineHR is a multi-day event that brings together hundreds of global heads of HR and their leadership teams, creating a unique opportunity for CEB members to engage in discussions with peers on critical topics, to consider the changing role of HR and to explore the innovation required to effectively plan, recruit, assess, develop, engage, and perform in a world of constant change.

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Culture Club: Regulating Wall Street’s mindset

Starling Team
Starling mentioned in an article by Jacob Schlesinger

Richard Ketchum, chairman of the Financial Industry Regulatory Authority, or Finra. SHANNON STAPLETON/REUTERS

When a top Wall Street regulator issued its examination priorities for 2016, the checklist included a mix of conventional benchmarks: cybersecurity, antimoneylaundering controls, liquidity and the like. But for the first time, the amorphous notion of supervising “culture” made its list, too. 

“Given the significant role culture plays in how a firm conducts its business, this year…we will formalize our assessment of firm culture to better understand how culture affects a firm’s compliance and risk management practices,” Richard Ketchum, chairman of the Financial Industry Regulatory Authority, Wall Street’s selfregulatory organization, wrote in his letter introducing the plan. 

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Cultural-Prudential Regulation: Micro and macro have company

Starling Team

Since the Financial Crisis, we have seen three distinct waves of regulatory activity in the financial sector. An initial focus was placed on micro-prudential rules targeting individual institutions, such as setting higher capital standards and liquidity levels. This was followed by an emphasis on macro-prudential tools targeting the financial industry, including guidance on lever- aged lending and the countercyclical capital buffer

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