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Lessons Learned from Banking Regulation

Complexities in Banking Regulation Leslie Kossoff

There was a fascinating piece in Joe Nocera's New York Times column in January about bank regulation and complexity. In it, he raises the question of whether the over-complexity of new banking regulations worldwide is going to cause greater difficulties and possible failures than a more sensible, streamlined approach.

This is an easy one. The answer is: Yes - because complexity causes failure.

Big failures or little. Lost time or opportunity. Lost money, customers, employees, profits, revenues, parts...you name it, if there's complexity built into your system, there are losses and failures going on.

The problem is, in most cases, it's hard to see them. That's because, in most cases (and unlike what's going on now around the world with banking regulations) the complexities are so deeply built into the way you do business that you don't even see them anymore.

That's actually why Quality, Lean and all the rest exist: to hunt out the variation (for which read 'complexity') in your systems. Once you can see them, then you can decide whether or not they serve your purposes.

Just so you know - in most cases, they don't. They're there because someone at some point came up with a solution that made sense at that moment that was reactive to a situation that no longer exists. Or wasn't as well thought out as it should be.

What we know is that the banks need to be better regulated - simply because the world can't afford another meltdown like we saw in 2008.

What we also know is that, not only because of Dodd-Frank in the United States, but in looking at banking regulation being imposed around the world (and, yes, that includes China, too) there is no coordination or consistency.

The threat - at least by the banks - is that the regulations are so overly complex and onerous that they won't be able to operate or keep their best talent. That may or may not be correct, but, let's face it, they've got skin in the game and a real reason for not wanting to be held accountable.

Putting their arguments aside, we come back to the same issues you need to be addressing in your own enterprise:

  • Where does complexity exist?
  • Why? What was the purpose of those policies or procedures?
  • Do they still apply?
  • If no, how do we get rid of them without causing replacement complexity?
  • If yes, how do we redesign what we've got to reduce the complexity?
  • And, finally, do we have the right measures to ensure that this - as well as other - complexities in our system are findable and addressable?

Go through that mini-assessment and you'll suddenly find that there are LOTS more profits available in your existing organization than you currently gain. Fast and easy, too.

Then you can start taking on the hard stuff.

More readings on successfully implementing Quality and Lean and Bank regulations:




Tags: bank regulation , banking , banking reform , central banks , complexities , deregulation , EU , European Central Bank , financial crisis , regul , regulation , regulatory arbitrage
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