Keeping up with regulatory expectations in banking

There is a scene in Lewis Carroll’s Through the Looking Glass where Alice in an encounter with the Red Queen has to run fast just to remain in one place.  Biologists use this Red Queen analogy to describe arms races in evolution, but for me if often comes to mind when talking to banking senior management about regulation.

At the New Banks Unit seminar on 15 October 2019 the regulators repeatedly referred to authorisation as the start of the journey to becoming a mature bank. They noted firms repeatedly facing pressure after outgrowing the risk and control framework they started with.

I frequently come across firms where their governance, systems, processes and risk management framework was endorsed (or at least not criticised) by the regulators in the past, but are now facing regulatory challenge.  Firms “fix” the problems highlighted by the regulators and move on, failing to grasp that you have to keep running to stay standing still.

Best practise and regulatory expectations are constantly changing in response to emerging risks and market developments.  Throw into the mix changes in your business’s size or product offering and the impact this has on what is seen as good practice and acceptable to the regulator and you find yourself like Alice having to undertake “…all the running you can do to keep in the same place.  If you want to get somewhere else, you must run at least twice as fast as that!”.

Bank management teams should constantly keep their eye on tomorrow to build the capability and capacity today to meet the demands of tomorrow to avoid adverse risk events and regulatory pressure.

Stephanie Henderson-Begg | Director, PwC United Kingdom
Profile | Email | +44 (0)7711 562280

Read more articles on