Global Regulator Spending Up By Nearly 60 Per Cent Since Financial Crash

Stephen Little

17 September 2014

Financial services regulators in the US, UK and Hong Kong have increased their expenditure over the last seven years by 59.4 per cent since the end of fiscal year 2006/07, an average of 8.075 per cent a year, a new survey from the global professional services firm Kinetic Partners has revealed.

The report suggests that the increase in spending may be a product of the growing pressure on regulatory agencies to deepen the scrutiny of those working in the financial services industry following the crash in 2008.

Kinetic Partners found that the US Securities and Exchange Commission, the UK Financial Conduct Authority and the Securities and Futures Commission of Hong Kong had a combined expenditure of approximately $2.4 billion in 2012/13 - over $900 million more than the total expenditure before the financial crisis in 2006/07 .

According to the survey, out of the three regulators over the last seven years, the Securities and Futures Commission of Hong Kong had the biggest increase in expenditure of 120.2 per cent from $69.25 million during the 2006/07 fiscal year to $152.50 million at the end of the 2012/13 fiscal year. This compares to a 61.9 per cent increase at the Securities and Exchange Commission in the US and a 48.4 per cent rise for the UK’s Financial Conduct Authority during the same period.

"The focus on effective regulation in the financial markets is no surprise following the 2008 crisis. The public is demanding that government agencies take greater steps to protect the public interest, which requires regulators to expand both the reach and efficiency of their monitoring activities. This not only requires more sophisticated tools, but also more feet on the ground," said Julian Korek, chief executive at Kinetic Partners.

"Regulators are demanding that firms have detailed policies, controls and monitoring such that if employees stray outside of these, it should be clear that they have committed a serious offense," added Korek.

The research revealed that the scope of the increase in expenditure spanned beyond increases in staff numbers at the three regulators, with an overall staff rise for all three agencies of 36.4 per cent from 2006/07 to 2012/13.

Korek said the disparity between expenditure and headcount could be indicative of a focus by the regulators to improve market surveillance by “developing innovative technologies and hiring more experienced, specialized staff.”

“For our clients across the banking, asset management and insurance sectors, we are seeing a mirroring of this investment in systems to monitor and report on transactions. This is coupled with a recognition that, for systems to work effectively, a different set of staff skills and training is required than traditional compliance or risk management expertise. We expect this investment in technology to continue to play a key role, in firms both large and small,” said Korek.