Playing by the rules
Regulatory reform has led to soaring respect for compliance experts
The compliance profession has benefited vastly from the transformation of the finance sector in recent years caused by waves of regulatory change. There are now more compliance professionals employed in the sector than ever before. The job market for what was once a niche role has grown hugely, while its practitioners are more respected than ever.
They are also paid more. It's not unusual for a global bank's head of compliance to be second in salary only to the chief executive, since they are called upon to shoulder the compliance risk of an entire financial organisation.
"Clearly, we have seen a massive amount of change in the regulatory landscape since 2009, and the focus now for financial institutions is thinking about how to sustain the new requirements and what this means for their business models," says David Scott, EY's financial services risk management partner.
"There's a new higher ongoing level of regulation now," he adds. "Regulators are more prescriptive in their rules and are challenging themselves more. I think an element of higher regulatory change management will become part of the status quo."
Keith Pogson, EY's global assurance leader for banking and capital markets, says compliance has also moved away from so-called "prudential legislation" - mainly dealing with concepts such as solvency and capital adequacy - towards conduct issues. Recent financial scandals, be it rogue traders or LIBOR-fixing offences, mean regulators worldwide are taking a long, hard look - and a tougher stance - on issues and existing financial regulation, from anti-money laundering to corporate bribery.
"My personal view is that most of the financial services industry will go through the mincer at some point," Pogson says. "It doesn't matter who's in the queue where."
He adds that while investment and retail banks were hit first, regulators are shifting the lens to the wholesale and commercial banking sectors. He expects insurance to be the next beachhead for compliance - a situation that has already materialised in the UK. The creation in Hong Kong of an independent Insurance Authority is likely to bring new regulatory reform.
Edward Chen, managing director of Asia-based banking and financial recruiter Harbridge Partners, says there has been demand in the jobs market for compliance and risk professionals. The emphasis is on experience in anti-money laundering and those with strong investigative backgrounds at regional monetary regulators. Banks are hiring, he says, but only to replace attrition. Some areas have been strengthened, such as regulatory policy and implementation projects for global governance initiatives such as Dodd-Frank, EMIR and FATCA.
"There has been a levelling off in terms of additional headcount for compliance," Chen says. "Banks are hiring but in some cases, when people leave, the tendency is often to transfer someone internally or replace them with more junior staff. Only a few [banks] are growing their teams." He adds there are exceptions, especially top-tier banks which are boosting competences to stay ahead of the regulatory environment.
The search for top compliance talent is taking a more aggressive hiring mode at mainland banks and financial services firms, some of which are still in the process of building their local compliance functions. Chen has seen hiring activity at stock brokerages and securities firms, which have come under an enhanced compliance and risk management regime under the Securities and Futures Commission in the last few years. He says salaries at mainland banks are competitive and there is openness to bonus guarantees to entice good talent - but the proviso is possession of strong Putonghua or Asian language skills.
Chen expects to see a growth in demand for compliance professionals in retail, commercial and investment banking, and fund management as private equity. Demand in private banking is expected to taper off. Demand in the insurance sector has remained steady, but new vacancies are harder to fill owing to a small talent pool and the specialised nature of the sector's compliance needs.
On pay, banks are keen to retain the compliance teams built up in recent years, and are using bonuses and deferred payments to entice people to stay, Chen says. Bonuses this year average around three to four months, compared to just one month in 2013. Bonuses at Chinese banks, as multiples of monthly salary, tend to be higher due to lower base salaries. They are also sometimes supplemented by "double pay", or paying 13 months instead of 12 in annual pay.
Some senior compliance executives are getting bonuses as much as six months salary, Chen says. He adds that in sharp contrast, annual internal pay rises for compliance professionals for this year average around 5 to 10 per cent, although someone who changes jobs to a new employer can often expect an increment of at least 10 to 20 per cent.