Risk rules will hurt top firms

THE world’s top 100 financial firms will be forced to stump up more than $111bn (£71bn) by 2012 to cope with the onslaught of new risk and compliance regulation, according to a report by?Deloitte.

Top firms spent $50bn on compliance procedures in 2006, but Basel II, Solvency II, the Companies Act and the Walker Review will force them to spend over double that in the next two years.

The extra investment will be spent on training staff, developing ways to model risk and computer systems.

Kari Hale, banking and securities partner at Deloitte, said: “The money needs to be spent. The regulators are unapologetic ?– London was close to economic meltdown.”

Banks have already spent significant sums on integrating separate finance, audit, risk and market surveillance systems.

But some companies are struggling to implement the changes and many are calling for clearer guidance on new regulation.

Hale added: “Without clearer definitions of risk appetite... it will be tremendously difficult for the new risk committees and their supporting corporate responsibility officers to deliver the Walkers Review’s aims or to pass the new and more stringent regulatory benchmark for systems and controls.”

Deloitte says the financial investment is only likely to work if there is a fundamental behavioural change in risk culture.

Martin Jones, chairman of corporate services at Deloitte, said: “The fundamental issue is around behavioural changes ?– without changes in behaviour, no framework will be truly effective.”