A View from Across the Pond

Last week, an article from the Wall Street Journal provided unique perspective of the current financial crisis in the United States from "across the pond" in Europe.  The article rightly points out that the crisis is not the result of a lack of regulation, but a lack of effective regulation due to overwhelming complexity and redundancy.  Here is an excerpt:

"American financial regulatory bodies have historically been fragmented. In a report published in November 2007, the U.S. Financial Services Round Table counted 10 different federal regulatory bodies with over 30,000 employees, and that's not even counting regulators for the 50 states. The report frequently describes U.S. financial regulation as prescriptive, complex, formalistic, expensive and inefficient. Regulations often overlapped, making the same financial institutions subject to different rules and different enforcers. The U.S. regulatory landscape may resemble a jungle, but only because of all the choking vines."

The report they reference in the article provides a very relevant example of the excessive and redundant requirements.  

"large U.S. banking organizations are being required to establish overlapping internal control reporting and compliance structures, as well as specific operational risk data collection, validation processes, and IT systems requirements. For example, the requirements of FDICIA and GLBA implicitly, and the requirements of SOX and [Basel II] explicitly, require a comprehensive system of “risk control self assessments” (RCSA) and related documentation. The cost of compliance with each of these regulatory requirements is significant, albeit difficult to quantify and segregate."

As the U.S. works to improve the effectiveness of its regulatory system, companies also need to look for ways to streamline and improve their compliance programs.  Wheelhouse Advisors can help.  Visit us on the internet at www.WheelhouseAdvisors.com to learn more.