The amazing growth of the regulatory environment in finance

[Metuo Accipiter]

Based on the numbers below you can argue there are 5X the number of regulatory changes per year than just 5 years ago. I



The amount of regulatory change tracked by Thomson Reuters for financial firms around the world has doubled in the last two years. The world's financial regulators issued an average 155 alerts on every business day in 2014 - a total of 40,603 for the year. These alerts relate to updates to their rulebooks, but also other announcements, policy papers, speeches and enforcement notices. In 2013, they issued an average of 103 updates every business day; in 2012 the number was 68.

These numbers provide hard evidence of the extraordinary growth of the compliance culture in the financial services industry
worldwide. The figures have been compiled by Thomson Reuters Regulatory Intelligence, which monitors more than 950 regulatory rulebooks worldwide published by more than 550 regulatory bodies.

The number of daily regulatory updates is perhaps as close as we can get to an authoritative measure of the extent of financial regulation growth since the crash. We have been compiling these figures since 2008, as the numbers and extent of rulebooks (and rulemaking bodies) have grown.
We also know that the consequences of failing to comply are becoming ever greater. In 2013, the UK regulator issued fines some 18 times greater than its predecessor had in 2008. Last year our report on the rising costs of non-compliance noted
the increased focus among regulators on greater accountability and personal liability for the individuals involved in breaches. We also noted that every global systemically important bank has been fined in recent years. The cost of compliance is not simply the amount handed over in fines, but also the cost of ending a business line, or perhaps
curtailing the provision of certain services. And there is also the risk of enduring reputational damage done to the brand.



In the UK, the Confederation of British Industry has been
loudly critical of the increase in the regulatory burden on financial
services firms. And across the world the representative bodies for
financial services firms – the trade associations and professional
bodies – have been growing increasingly vocal about the increase in
output from the world’ s regulatory bodies.

Not all of it is relevant for every firm, clearly.
Insurers, banks and asset managers have very different operating models,
and are subject to very different rules. Business-to-business financial
services needs regulation very different to client-facing operations.
But their compliance officers will need to check the relevance of all
155 daily updates all the same

Our report “The Rising Costs of Non-Compliance” noted:

“Firms have to contend not only with jurisdiction-specific
changes but also with multiple levels of changes which are not
necessarily aligned when it comes to cross-border business. Regulatory
divergence, particularly regarding areas such as the trans-Atlantic
trading and settlement of derivatives, has become the norm and will
require significant political and regulatory effort to resolve.”

If you are the chief risk officer of an international
business, you are clearly presented with a problem. Assuming you don’t
get to double your compliance workforce every two years, you are faced
with sifting through an increasing amount of often very dense and
specific prose to determine (a) whether a new update is relevant to your
business (b) whether it requires you to implement any changes to your
current operations. And – need I repeat – you need to do this on average
155 times a day...

reuters



This post was edited on 3/16 1:26 PM by Metuo Accipiter

 

[What Would Jesus Do?]

It's hard to be sympathetic to whining about "regulatory burden" when a reduced and clearly inadequate regulatory regime let financial bad actors bring the world economy to its knees not long ago.

I'm sure we could find plenty of regulations we could agree aren't helpful, aren't needed and are possibly causing more harm than good. But everything I have read suggests that we have a dangerous regulatory deficit, not a burden. We need better, stronger regulations that are aggressively enforced by well-staffed, non-partisan agencies with the authority to jail the bad actors and break up the offending companies.

 

[Metuo Accipiter]

Originally posted by What Would Jesus Do?:
It's hard to be sympathetic to whining about "regulatory burden" when a reduced and clearly inadequate regulatory regime let financial bad actors bring the world economy to its knees not long ago.

I'm sure we could find plenty of regulations we could agree aren't helpful, aren't needed and are possibly causing more harm than good. But everything I have read suggests that we have a dangerous regulatory deficit, not a burden. We need better, stronger regulations that are aggressively enforced by well-staffed, non-partisan agencies with the authority to jail the bad actors and break up the offending companies.

Under regulated? You have no business background whatsoever do you?

I'm curious - are you a fan of a future where only the corporate giants can compete? Because in this exponential growth the small and mid-sized companies have a competitive disadvantage as they can't afford to continue to hire the regulatory staffs required to manage this burden.

 

[Metuo Accipiter]

Just to put it in perspective - here is the average regulatory cost burden per household

regulatory costs

 

[Metuo Accipiter]

The amount the US spends on regulation is larger than most countries' GDP's.

This post was edited on 3/16 8:43 PM by Metuo Accipiter

 

[naturalmwa]

Originally posted by Metuo Accipiter:
The amount the US spends on regulation is larger than most countries' GDP's.

This post was edited on 3/16 8:43 PM by Metuo Accipiter

Imagine if we tied our regulations to our trade deals? Winning!

 

[augHAWK]

What Metuo said. This is right on.
Posted from Rivals Mobile

 

[St. Louis Hawk]

Originally posted by augHAWK:
What Metuo said. This is right on.

Posted from Rivals Mobile

It's actually not even close, and it is purposefully written in a misleading way. Among the many problems:

1. It's not a scientific study. Even the author admits that. Why do cons hate science so much?

2. In fact, the author says it is "back of the envelope" math. Good to know that this level of proof suffices around here now.

3. The study doesn't say that each household pays the regulatory costs each year - again, the author says those are embedded in the entire economy and each household doesn't "pay" 15k in regulatory costs per year.

4. The "study" makes no attempt to quantify any benefits from regulation - the weakest point. If regulations impose costs, we can all admit that, they also provide benefits. In fact, most new regulations have to be scored for cost benefit ratios. I wonder why the author of the "study" would leave out any estimate of the benefits of regulations?

5. And since cons now cite Washington Post Pinocchio index for Hillary and Obama all the time, Washpo gave the 15k paid per household claim two Pinocchios.

6. I wonder what the financial sector has done in the last decade or so that would justify increased regulations?


But other than that, this is "right on".

 

[Metuo Accipiter]

Originally posted by St. Louis Hawk:
It's actually not even close, and it is purposefully written in a misleading way. Among the many problems:

1. It's not a scientific study. Even the author admits that. Why do cons hate science so much?

2. In fact, the author says it is "back of the envelope" math. Good to know that this level of proof suffices around here now.

3. The study doesn't say that each household pays the regulatory costs each year - again, the author says those are embedded in the entire economy and each household doesn't "pay" 15k in regulatory costs per year.

4. The "study" makes no attempt to quantify any benefits from regulation - the weakest point. If regulations impose costs, we can all admit that, they also provide benefits. In fact, most new regulations have to be scored for cost benefit ratios. I wonder why the author of the "study" would leave out any estimate of the benefits of regulations?

5. And since cons now cite Washington Post Pinocchio index for Hillary and Obama all the time, Washpo gave the 15k paid per household claim two Pinocchios.

6. I wonder what the financial sector has done in the last decade or so that would justify increased regulations?


But other than that, this is "right on".

I'm not really sure what you've done here - but it appears you are conflating two different articles. There is more than one cited article - one pertaining to financial regulation - the other is pertaining to regulation in general.

As for some of your points - are you actually trying to argue the regulatory burden isn't growing substantially? Is that your claim? If not - then what's the point of your rant? Just to discredit one article? Did you actually try to research the stats to find second sources? C'mon Mr Science - did you fail to do your due diligence and instead just attacked the source because you didn't like the message???

Anyway - since you're so concerned about the source - how about you read the following SBA.gov study. Maybe that will soothe your troubled mind as they found the average regulatory cost per household in the US was over $15,000 even back in 2008!

Executive Summary

The annual cost of federal regulations in the United States increased to more than $1.75 trillion in 2008. Had every U.S. household paid an equal share of the federal regulatory burden, each would have owed $15,586 in 2008.


This post was edited on 3/17 9:56 AM by Metuo Accipiter

 

[CarolinaHawkeye]

Originally posted by What Would Jesus Do?:
It's hard to be sympathetic to whining about "regulatory burden" when a reduced and clearly inadequate regulatory regime let financial bad actors bring the world economy to its knees not long ago.

I'm sure we could find plenty of regulations we could agree aren't helpful, aren't needed and are possibly causing more harm than good. But everything I have read suggests that we have a dangerous regulatory deficit, not a burden. We need better, stronger regulations that are aggressively enforced by well-staffed, non-partisan agencies with the authority to jail the bad actors and break up the offending companies.

While you are correct that the financial bad actors, as you call them, almost brought the economy to its knees, the new regulations imposed will only hurt small and medium sized financial institutions and benefit the main culprits in the mess. I think the fact that the big banks basically wrote them should tell you everything you need to know about them. I do agree that regulations are needed but they really to address the problems of having too much power in the hands of a few.

 

[Metuo Accipiter]

St Louis Hawk -
I found your washington post article and see you basically stole half your content from it. Anyway, why do you think the Washington Post is more of a definitive authority on the subject than the Small Business Administration, the CEI and the National Association of Manufacturing? And by the way - the Post doesn't really question the cost estimates for the regulation - they are questioning how it was presented. I guess they think people are idiots and the article must point out there are also benefits of regulation. And the article also must point out that the 'per household' figure doesn't mean each household is writing a check. That's just idiotic.

And one more thing - in response to your "why do you hate science" statement - see the references below. Obviously you didn't take the time to actually try to verify the numbers as they are clearly in line with what others have been finding. You just habitually jumped to the tired old 'attack the source' strategy.


2013 estimate from CEI.org
Regulatory costs amount to an average of $14,974 per household - 23 percent of the average household income of $65,596 and 29 percent of the expenditure budget of $51,442. This exceeds every item in the household budget except housing - more than health care, food, transportation, entertainment, apparel, services, and savings. Some 63 departments, agencies and commissions have regulations in the pipeline.

US News from the National Association of Manufacturers
The new study found that the total overall cost of federal regulations for businesses in the U.S. was more than $2 trillion in 2012, equal to 12 percent of the U.S. gross domestic product. Expressing the costs in terms of GDP, however, might paint an incomplete picture.








This post was edited on 3/17 10:07 AM by Metuo Accipiter

 

[Metuo Accipiter]

Originally posted by CarolinaHawkeye:

While you are correct that the financial bad actors, as you call them, almost brought the economy to its knees, the new regulations imposed will only hurt small and medium sized financial institutions and benefit the main culprits in the mess. I think the fact that the big banks basically wrote them should tell you everything you need to know about them. I do agree that regulations are needed but they really to address the problems of having too much power in the hands of a few.

Much like our current immigration system - the problem wasn't that there weren't enough laws/regulations - the problem is/was that they laws on the books weren't being enforced.

This post was edited on 3/17 9:26 AM by Metuo Accipiter

 

[Metuo Accipiter]

Here is a different take on the cost of regulation. This study from the Journal of Economic Growth (it also addresses the 'benefits' side of regulation)

Federal Regulations Have Made You 75% Poorer.

The growth of federal regulations over the past six decades has cut U.S. economic growth by an average of 2 percentage points per year, according to a new $53,000 we get now....

.....Dawson and Seater explicitly do not attempt to separately measure the benefits of regulation in their study, only its overall effects on output. But the Office of Management and Budget does claim to measure the costs and
benefits of federal regulation. In the most recent Office of Information and Regulatory Affairs (OIRA) report,
the highest estimates for costs and benefits for regulations adopted from 2002 to 2012 are $84 billion and $800 billion respectively. Let's be extremely generous in calculating regulation's benefits and assume that they provide not just $800 billion in total benefits over 10 years, but that much in just one year. Then, just to be sure that we haven't overlooked any non-monetized benefits unaccounted for the OIRA, and to take into account of the fact that number of pages in the CFR have risen six-fold, let's multiply that by 6, yielding an estimated annual regulatory benefit of $4.8 trillion.

That's just a bit more than a quarter of the current GDP. Recall that Dawson and Seater have calculated that if the regulatory

burden had remained the same as it was in 1949, the U.S. economy would be about $38 trillion bigger than it currently is. So the upshot of this wildly optimistic set of assumptions regarding the benefits of regulation is that Americans have foregone $33 trillion in income that we otherwise would have had. Or in the alternative case, where a lower rate of growth results in a GDP of only $31 trillion, that would mean that Americans have foregone about $10 trillion in income due to overregulation.

This post was edited on 3/17 8:07 AM by Metuo Accipiter

 

[naturalmwa]

Originally posted by Metuo Accipiter:
Here is a different take on the cost of regulation. This study from the Journal of Economic Growth (it also addresses the 'benefits' side of regulation)

Federal Regulations Have Made You 75% Poorer.

The growth of federal regulations over the past six decades has cut U.S. economic growth by an average of 2 percentage points per year, according to a new $53,000 we get now....

.....Dawson and Seater explicitly do not attempt to separately measure the benefits of regulation in their study, only its overall effects on output. But the Office of Management and Budget does claim to measure the costs and
benefits of federal regulation. In the most recent Office of Information and Regulatory Affairs (OIRA) report,
the highest estimates for costs and benefits for regulations adopted from 2002 to 2012 are $84 billion and $800 billion respectively. Let's be extremely generous in calculating regulation's benefits and assume that they provide not just $800 billion in total benefits over 10 years, but that much in just one year. Then, just to be sure that we haven't overlooked any non-monetized benefits unaccounted for the OIRA, and to take into account of the fact that number of pages in the CFR have risen six-fold, let's multiply that by 6, yielding an estimated annual regulatory benefit of $4.8 trillion.

That's just a bit more than a quarter of the current GDP. Recall that Dawson and Seater have calculated that if the regulatory

burden had remained the same as it was in 1949, the U.S. economy would be about $38 trillion bigger than it currently is. So the upshot of this wildly optimistic set of assumptions regarding the benefits of regulation is that Americans have foregone $33 trillion in income that we otherwise would have had. Or in the alternative case, where a lower rate of growth results in a GDP of only $31 trillion, that would mean that Americans have foregone about $10 trillion in income due to overregulation.

This post was edited on 3/17 8:07 AM by Metuo Accipiter

Do you find this a compelling and accurate picture or is this just an extreme data point you are tossing out to stir the pot?

 

[joelbc1]

Muteo....the financial industry has earned every damned bit of regulation is has.....and honestly, it deserves MORE regulation.
These BASTARDS ARE ARE THIEVES! If given to their own devises, they would steal every cent from everyone of us and not think twice about it. Screw'em.

 

[St. Louis Hawk]

Originally posted by Metuo Accipiter:

Originally posted by St. Louis Hawk:
It's actually not even close, and it is purposefully written in a misleading way. Among the many problems:

1. It's not a scientific study. Even the author admits that. Why do cons hate science so much?

2. In fact, the author says it is "back of the envelope" math. Good to know that this level of proof suffices around here now.

3. The study doesn't say that each household pays the regulatory costs each year - again, the author says those are embedded in the entire economy and each household doesn't "pay" 15k in regulatory costs per year.

4. The "study" makes no attempt to quantify any benefits from regulation - the weakest point. If regulations impose costs, we can all admit that, they also provide benefits. In fact, most new regulations have to be scored for cost benefit ratios. I wonder why the author of the "study" would leave out any estimate of the benefits of regulations?

5. And since cons now cite Washington Post Pinocchio index for Hillary and Obama all the time, Washpo gave the 15k paid per household claim two Pinocchios.

6. I wonder what the financial sector has done in the last decade or so that would justify increased regulations?


But other than that, this is "right on".

As for some of your points - are you actually trying to argue the regulatory burden isn't growing substantially? Is that your claim? If not - then what's the point of your rant?

No. I've said nothing about the regulatory burden, only the weakness of the article you cited in support of your belief of the amount per household is 15k.

Again, regulations impost costs. As I admitted. See #4 above.

What you refuse to admit (or at least have not admitted so far) is that regulations confer benefits as well. Seat belt regulations impose costs on manufacturers and pass through to consumers, but the economy also benefits substantially with fewer deaths and fewer severe injuries, meaning employees return to work or return to work sooner, which benefits the economy ...

Until you have a study that says we estimate the costs of regulation per household at $15k per year, and we estimate the benefits of regulations per household at $__k per year, for a net [positive or negative], and here is our methodology, then all you are doing is providing a half-truth, which is not a truth at all.

I would be interested in a study, i.e. not some back of the envelope math, or pablum from Heritage or Cato, regarding both sides of the equation as this is actually an interesting topic.

 

[Metuo Accipiter]

Originally posted by St. Louis Hawk:
No. I've said nothing about the regulatory burden, only the weakness of the article you cited in support of your belief of the amount per household is 15k.

Again, regulations impost costs. As I admitted. See #4 above.

What you refuse to admit (or at least have not admitted so far) is that regulations confer benefits as well. Seat belt regulations impose costs on manufacturers and pass through to consumers, but the economy also benefits substantially with fewer deaths and fewer severe injuries, meaning employees return to work or return to work sooner, which benefits the economy ...

Until you have a study that says we estimate the costs of regulation per household at $15k per year, and we estimate the benefits of regulations per household at $__k per year, for a net [positive or negative], and here is our methodology, then all you are doing is providing a half-truth, which is not a truth at all.

I would be interested in a study, i.e. not some back of the envelope math, or pablum from Heritage or Cato, regarding both sides of the equation as this is actually an interesting topic.

Are you really going to expect a person to have to point out something that's so patently obvious? (res ipsa loquitur) Can you not understand the complaint in the article is about the level/amount of regulation -- not a fight against having regulation in the first place? Who is out there arguing there should be no regulation?

And by the way - I did address the benefit of regulation. See the article I linked above: Federal Regulations Have Made You 75% Poorer.


[/B]


This post was edited on 3/17 12:54 PM by Metuo Accipiter

 

[St. Louis Hawk]

Originally posted by Metuo Accipiter:

Originally posted by St. Louis Hawk:
No. I've said nothing about the regulatory burden, only the weakness of the article you cited in support of your belief of the amount per household is 15k.

Again, regulations impost costs. As I admitted. See #4 above.

What you refuse to admit (or at least have not admitted so far) is that regulations confer benefits as well. Seat belt regulations impose costs on manufacturers and pass through to consumers, but the economy also benefits substantially with fewer deaths and fewer severe injuries, meaning employees return to work or return to work sooner, which benefits the economy ...

Until you have a study that says we estimate the costs of regulation per household at $15k per year, and we estimate the benefits of regulations per household at $__k per year, for a net [positive or negative], and here is our methodology, then all you are doing is providing a half-truth, which is not a truth at all.

I would be interested in a study, i.e. not some back of the envelope math, or pablum from Heritage or Cato, regarding both sides of the equation as this is actually an interesting topic.

Are you really going to expect a person to have to point out something that's so patently obvious? (res ipsa loquitur) Can you not understand the complaint in the article is about the level/amount of regulation -- not a fight against having regulation in the first place?

While I think it is patently obvious, you were the one that posted a chart and another chart, both of which purportedly quantify the amount households "pay" in regulatory costs. Both were linked to or based on studies/articles that don't attempt to quantify the value of regulatory benefits.

If that was your point, and if "the complaint in the article is about the level/amount of regulation", you can't really expect someone to respond to or make that determination in the abstract, you have to look at regulatory benefits. It's like saying don't you agree taxes are too high? My response is what we are we going to spend the tax dollars on?

When I raised the issue of benefits above, you didn't initially respond to that point. You have now. Glad to see we both agree.

I'll look at your linked article I chopped off this reply.