The European Central Bank keeps expressing its various concerns. In the latest update, the institution confirms how EU banks fail on the compliance level.
The ECB is Very Concerned
All banks across the world need to adhere to very strict guidelines. Especially where compliance is concerned, no corners can be cut. For some reason, European banks fail miserably in this regard. So much even that the ECB is growing increasingly concerned about the current situation.
In fact, the central bank identifies several core weaknesses in governance, staffing, and policy implementations. Although some banks have attempted to remedy the situation, key problems remain in place. Without proper compliance, these financial institutions pose systemic risks.
One core problem comes in the form of newly appointed chief compliance officers. Most banks appoint staffers who still keep their previous job as well. The juggling of these responsibilities causes the compliance-related lack of focus.
The ECB explains:
“As an overarching principle, the chief compliance officer needs to devote sufficient attention to compliance and should therefore be dedicated to the role on a full-time basis.
Despite a slight increase over the past few years, the staffing of some banks’ compliance teams remains too low to cope with any increase in compliance-related workload or challenges.”
IT Issues Remain
Another contributing factor to the compliance shortcomings is the IT infrastructure. Any bank maintaining a weak infrastructure will have a tough time identifying risks. European banks need to pay closer attention to recent developments in IT.
For now, the ECB will keep monitoring the situation. It will also keep pressing banks to enhance their compliance solutions. Addressing this problem needs to be done swiftly and concisely. Changing the mindset of certain banks will prove very challenging. That said, the right tone needs to be set in this department.