Nowadays, there seems to be a huge amount of general information on banking middle and back office. Alongside that is compliance, where does it sit, and how?

Traditionally, compliance would sit in middle office with risk management, corporate treasury, corporate strategy, financial control and finally compliance. However, this is starting to change due to the advent of digital banking, mobile banking and challenger banks in the neo banking space which are driving compliance pressures into all areas of front, middle and back-office.

Regulatory compliance is being enforced more strictly than ever before. The tougher regulatory environment being applied in banking has called for more ring-fencing of individual departments and strict separation of certain processes and services. Part of the benefit of taking on back-office automated services from a software provider like psKINETIC, is that it is easier for banks to prove that each department and its relevant processes have been separated as required by new regulation.

Combining compliance in the middle and back office with centralised API-driven workflow management has and is providing banks improved robustness and resilience in this area of operational exposure. Ring-fencing has been a headline-grabbing concern when it comes to regulatory change. As such, many banks have been undergoing significant restructuring of back-office operations to help them comply with new rules, forcing banks to separate retail business operations from riskier business departments.

To address this, many banks have set up new standalone-unit companies so they can isolate support services from main profit-generating businesses. The aim, isolating risk so that critical support functions continue to run smoothly if and when other departments hit major hurdles.

Part of setting up these new support-service departments, in the most effective way, whilst meeting these strict regulatory standards is enlisting the services of external enterprise software providers. Banks who have achieved the greatest amount of success have chosen providers experienced in the FS space, who can provide exact fit, first time right solutions. The right software solution can automate up to 85% of compliance and regulatory checks. How? By removing the traditional manual steps associated with each check, allowing banks to develop the most efficient tools and solutions to provide the precise and fully auditable regulatory environment required of each department.

This approach leaves banks free to maintain focus on profit generation, whilst providing peace of mind that the dynamic and tightening regulatory changes are being incorporated into middle and back-office processes. Standardisation is becoming a paramount focus for regulators across numerous industry segments, and the increased complex compliance requirements of middle- and back-office functions help banks meet the standards required with the added agility to adapt if and when the standards are changed. 

There have been skeptics in the industry who believe that using this type of approach is not required. However, in my opinion, the financial crisis proved that regulatory compliance has never been more paramount and the old way of doing things is simply too slow and cumbersome, prone to human error and no longer works in the evolving, fast-paced banking technology space.

We have seen that middle and back-office automation has enhanced regulatory compliance and has in fact become the driving force for banks adopting bleeding edge technology services, rather than the contrary. Over the last 5 years, as more banks adopt AI-driven, automated compliance solutions, the reality has shown the more they utilise this technology, the happier their customers are and the more profit they make.

David Landi – Head of Asset Management
E: David.landi@pskinetic.com
www.linkedin.com/in/david-landi/