Research articles can be dry and boring, so it is important to capture your reader as quickly as possible. One writer over at Deutsche Bank tasked with writing about bank regulation found inspiration in the most obvious of places... Italian 14th century poetry about hell.
“In the middle of our life’s journey, I found myself in a dark wood, for the straight path was lost.” What was true of Dante’s allegory has also been true of bank regulation since the crisis.
In fairness, that line is the very first stanza of Dante's "Inferno," well before our hero starts actually investigating the horror-filled afterlife. But according to Deutsche Bank, the financial industry has already descended past purgatorio and into the circle of the over-regulated. And like Dante, this writer is more than willing to name the names of who he sees there...
The bureaucracy of financial regulation, never diminutive even in ordinary times, has now grown to eye-watering levels. Employees in JPMorgan’s mortgage business, reportedly completed 800,000 hours of compliance training in 2014 alone. Compliance groups in the large global banks now run to thousands of people. For instance, HSBC has increased its headcount associated with compliance by six-fold to 9,000 people since 2010. Around a tenth of the bank’s 255,000 full-time employees now work in risk and compliance. Similarly, JPMorgan has hired 8,000 people in compliance since the crisis
But if JPM and HSBC are already toiling in the fiery pits of regulatory hell, where lies the fate of Deutsche Bank, a firm almost overcome by the perils of compliance?
At Deutsche Bank the burden of regulatory disclosures has resulted in an annual report of around 600 pages, six times as many as 25 years ago. It is not just page inflation. Readers unfamiliar with AFS, CFR, CPR, CVA, DRE, DVA, EAD, FVA, IMM, LCR, LGD, MREL, NQH, NSFR, SFT, SNLP or TLAC, would struggle to comprehend many of the issues in a modern bank’s annual report.
Ah, cry for German lenders! For they are besieged on all sides by the busy-work of acronyms meant to keep safe the world economy. Why cannot the horned regulators release the bankers from their icy grip, and allow capital to flow more freely among the living?
Perhaps because it is their very nature.
Take it away, Dante:
"They stretched their hooks towards the pitch-ensnared,
Who were already baked within the crust,
And in this manner busied did we leave them."
Bank regulation—let lenders do their job [Deutsche Bank Konzept]