- Former Managing Director and the Head of the Regulatory Management Team for JPMorgan Chase & Co. responsible for coordinating the firm’s internal dealings with supervisors and regulators globally.
- Designed and managed the firm’s Corporate Operational Risk function; and, prior to that, served as the firm’s Senior Credit Officer. He also was the General Manager of the Singapore Office and Regional Head of Credit for Asia Pacific. He was the Global Head of Credit Research and served for a time in Tokyo as the Head of the firm’s M&A Advisory function.
- Bank Supervision and Regulation Division of the Federal Reserve Bank of Cleveland.
- Founding member (JPMorgan) and Chairman, Operational Risk Data Exchange Association (ORX)
- Vice Chairman of the Board of Trustees of Case Western Reserve University and serves as Chairman of the Finance Committee.
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Regulatory Management Strategies for Financial Institutions
- Companies need new skills in the face of an entirely new regulatory regime.
One of most common problems is caused by new regulations that require some unit or aspect of a larger firm to deal for the first time with federal regulators, or with a regulatory body with which it is unfamiliar. For instance, an entity dealing with the Federal Reserve for the first time. Another example may be an institution that is approaching the $50 billion asset size threshold at which point regulatory expectations change materially. Now, they must enter the big leagues and deal with these entities due to a rule change. They enter new territory and the management may be unprepared to deal with regulatory bodies at that level.
- A company has a dismissive or adversarial relationship with regulators.
“Why are the regulators bothering me?” “You won't believe what this regulator said!” "The regulators don't know our business and they're making us jump through unnecessary hoops.” At the working level business managers and other staff members often see and feel the burden of regulatory requirements with limited understanding of their context. Negative attitudes and reactions are only human nature. Yet, these types of attitudes do not serve financial institutions in meeting their obligations and dealing with regulators.
It is important that senior managers, risk and legal professionals establish a positive, zero tolerance culture about regulatory compliance. Senior managers need to show a united front. When a dismissive or adversarial tone is part of the culture of the firm or the group, small issues can turn into big ones. This occurs because people with negative attitudes will not listen to, learn from, or address regulatory issues until they become a major problem.
- Companies treat regulatory issues as independent problems and they fail to link their regulatory agenda with the overall management of business processes.
Regulatory issues arise because financial firms have deficiencies in underlying processes or controls within their normal business operations. However, companies that mitigate regulatory problems have a strong understanding of their control environment; risk and other key managers are fully accountable for the quality of the both control environment and the regulatory agenda; and they invest and prioritize accordingly. Such companies also have strong collaboration across all units in a spirit of "lessons learned." Conversely, if compliance with regulatory requirements and the overall regulatory agenda is "siloed" to legal, compliance or risk teams, and regulatory management is not integrated into the overall control environment management, ongoing regulatory issues are likely to continue. Preventative measures, along with an active process to coordinate remedial reviews and actions across all organization units, is critical to success.
- The financial crisis of 2008 has changed the rules and expectations permanently and companies are challenged to keep up.
- A completely new regulatory approach and attitude is now in place for large financial companies in the U.S. Previous operating models and staffing levels used to deal with regulatory requirements are no longer adequate. Prior to the financial crisis, the banking industry was operating under a presumption of innocence and good faith. Over the last few years the operating assumption of the primary bank regulators is one of far less tolerance for noncompliance, and a greater expectation in terms of documentation and evidence that new standards are being met. This is likely to remain the assumption moving forward and for the foreseeable future. Increased and very careful scrutiny is likely to remain a challenge for financial institutions.
- Insightful reporting is always a challenge as financial services companies are overwhelmed by data.
There's an axiom that says: "If you can't measure it, you can't manage it." Financial institutions are overwhelmed with data. There is more than an abundance of reports. Yet oftentimes the real challenge is deciphering between data and information.
There's a significant difference between information conveyance – meaning pages and pages of data – versus an insightful portrayal of key information that highlights developing trends, anomalies and actionable matters for attention. Companies get overwhelmed with data because there are so many areas to measure, including performance indicators, control measures, risk statistics, customer data, product statistics, regulatory statistics, etc.
Many firms address this challenge by reporting everything, transferring the burden of interpretation from the subject matter expert to the report recipient. It is the responsibility of risk managers and others, as stewards of the firm's safety and soundness, to own the difference between conveying information and communicating insight. It is these insights that need to be documented such that they will inform a senior manager or board member about key issues and key vulnerabilities.