The Bard and the Bank Regulators
“Be wary then; best safety lies in fear,” said Laertes to Ophelia as she embarked on her doomed dalliance with Hamlet. That is sound advice for banks and their regulators, too, as they face the prospect of technological disruption.
LONDON – Banking supervision teams at the Bank of England “now receive the equivalent of twice the entire works of Shakespeare of reading each week.” So says Huw van Steenis, the author of a new report, “Future of Finance,” commissioned by the Bank’s outgoing governor, Mark Carney.
One might argue with the word “equivalent.” Few regulatory submissions rival the Bard’s output in their timelessness or vivid use of language: the Bank of England would probably send them winging straight back to their originators if they did. But van Steenis’s point about the volume of reporting is a valid one. The system of banking supervision has become highly complex, with a risk that the forest is entirely lost from view in the midst of thousands of trees.
The team that produced the report commissioned McKinsey and Company to assess the cost of all this reporting to banks in the United Kingdom. Their estimate is £2-4.5 billion ($2.5-5.7 billion) per year – rather a broad range, but even the lower bound is a big number, with a material impact on profitability.