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Crystal ball

Regulatory changes won’t prevent future crash, says survey

Just three per cent of financial services professionals polled globally believe that the regulatory changes implemented since 2008 have done enough to prevent a future crash, according to a survey by Kinetic Partners.

Furthermore, just 12 per cent of respondents believe that regulators fully understand how the financial crisis was allowed to happen in the first place.
These findings, compiled on behalf of Kinetic Partners’ 2014 Global Regulatory Outlook report, are nearly identical at the most senior levels, with only four per cent of “c-suite” executives polled believing that regulation had adequately mitigated the risk of another crash, and 39 per cent of this group saying it had been only partly addressed.
The survey reveals that more than half (52 per cent) of those polled who work for banks, asset managers and hedge funds globally, and 61 per cent of those based in the US, feel that changes to regulation have not created adequate safeguards to prevent a future crash. A further 41 per cent of respondents say that the risks have been only partly addressed.
Andrew Shrimpton, global head of regulatory compliance at Kinetic Partners, says: “Five years on from the trauma of 2008, there appears to be very little confidence that any real lessons have been learnt. That should not only worry regulators, but should also prompt financial services firms to examine their own risk management and controls and ask how well they have mitigated the risks of another crisis.”
Kinetic Partners’ 2014 Global Regulatory Outlook report also reveals that very few people believe that regulators have a handle on the causes of the financial crisis even now. Of over 300 finance professionals surveyed on whether regulators fully understand how the crisis was allowed to happen, just 35 say they did. Of the remainder, more than one-third (38 per cent) say they do not, and nearly half (47 per cent) say that regulators only partly understand the causes.
Douglas Shulman, Kinetic Partners’ director of regulatory compliance in New York, says: “Regulatory examinations have become more detailed, and honed, in an attempt to address risks across the industry. There is a focus on stress-testing the compliance policies, procedures and control infrastructure at firms. Additionally, regulators will want to see that senior management understands the core risks of their firms – and principals of firms should expect to have their knowledge of such risks tested during exams. Ultimately, firms are being challenged to prove that they are taking ownership of the end-to-end risk and compliance processes.”

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