The financial services regulatory in-house practice: the emergence of a new era

There has been an increase in recent years of the importance of the regulatory practice within leading financial institutions and we are now seeing news levels of investment from some of the leading banks.

Banks that have historically invested in regulatory oversight are now redesigning those structures with new individuals at the helm; those that have not had this level of regulatory coverage are now tailoring structures to fit their own needs and are mainly populating them at the senior end with individuals from the regulators.  

Why has there been new investment?

Due to the fines for regulatory breaches of late reaching unprecedented amounts, we are now seeing new levels of investment from all of the major banks to avoid this action against them in the future.frefred

The remit of a regulatory lawyer

This can vary within each financial institution, however a general overview can be seen below:

• Responsibility to manage and strengthen regulatory relationships
• Advising the senior leadership of the bank on how to develop strategies to manage the regulatory impact to areas of the business and how to engage with the regulator
• Lead discussions with senior management to identify themes and issues
• Ensure that any regulatory developments are understood and addressed 
• Ad hoc regulatory change projects with oversight for the implementation of these changes throughout the bank, often through advisory working groups containing specific SMEs, and change professionals made up of existing change teams and contractors

The home of a regulatory lawyer

Whilst there is a clear theme at a high level of augmenting regulatory support, the detail of how that is structured seems to vary in every institution: some have opted to house it in the Compliance department; some have built it into their Legal department and there are instances where regulatory oversight is a fiefdom in its own right, reporting up to firm management.

Despite several different structures there is, however, one common goal: to guide the bank through the regulatory headwinds in the current environment.

Conclusion

The talent pool of regulatory professionals is entering a new phase similar to that in the US, where we can see a revolving door between regulatory bodies and regulated entities.

In the US this has created a higher level of trust between control functions in financial institutions and regulators. Indeed, one Director at the FCA, who recently lost a Head of Department to an investment bank, recently stated that the regulator viewed it positively that they were going to a regulated entity rather than a law firm or a consultancy.

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