FST speaks with Markus Schulz, Chief Compliance Officer at a major global insurance company, about his personal views on the challenges of a tighter, post-crisis regulatory regime. Some financial organisations are reporting a huge increase in compliance workload as a result of growing regulatory requirements. Is that something you’re seeing and if so, how are you coping with it? Markus Schulz. There are indeed a number, one could even say a large number, of new and revised regulations on the horizon and perhaps even more ideas and concepts where it is unclear at the moment if they will make it into regulation. However, there is one aspect that I think is important to realise for many of the regulations, to see where there are potential differences between the various sectors, such as insurance is not the same as Banking. Therefore, it is important that the public and the private sector work closely together to establish where these potential differences are and what they mean for new regulations. It’s maybe more than ever a case of not one-size-fits-all and that’s something I see many corporations engaging in right now. One example for this is Solvency II, which is one of the aspects where it seems to be critical to differentiate amongst the various industries and business lines and sometimes maybe even within those business lines. I believe that all industries are keen to have the right solvency levels, but right needs to be defined well and also in relation to the market standards of an industry where historically some have held higher solvency levels than others. It won’t be beneficial for the markets and the consumers if unrealistic solvency requirements are established that cannot be met. But this is also an opportunity to create a level playing field by introducing the right requirements. I don’t believe that anyone is completely relaxed about the new wave of regulations and this may vary institution by institution, but there only a few things that some large companies in the financial services industry may have not started working on already in advance of it becoming a new regulation, which is the last step in a long process. One aspect that is behind many of the new regulations is the concept of treating customers fairly. While every company has a kind of customer centric approach it is more a focus than ever. In the UK for example we have the retail distribution review and in other countries there are similar developments requiring distributors to change their models and for producers to see how to best serve this new market set-up. After the Lehman’s story we have seen an even bigger regulatory focus on marketing material disclosure, ease of language, ease of marketing material and meeting customer needs, which is not new to the industry, but has requested a lot from compliance functions and the business to ensure there is no ambiguity towards the customer and that customers have a fair chance to understand what they are buying. This is also the objective of the Packed Retail Investment Products (PRIP) review work on EU level at the moment. Is tackling these challenges more a case of optimising processes rather than simply hiring more compliance officers? MS. This varies by company and when talking to my colleagues, some have staffed up and others have rearranged matters and reprioritised. What I noticed is that there seems to be a noticeable increase on the solvency teams where some additional manpower is often necessary to meet short time lines. Some companies don’t seem to have made any major changes, which could be an indication that they started a little earlier with some of this giving them a longer period to meet the objectives.
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23/07/2010 16:04