Firm size and compliance costs asymmetries in the investment services

Abstract

Purpose -The purpose of this paper is to find out how effectively implemented are measuring approaches to compliance and whether there is a correlation between the measures implementation, financial specialisation and international activity. The authors evaluate if the regulatory framework implies a measure cost asymmetry, depending both on the proportionality principle and on the existence of different supervisors with an heterogeneous set of enforcement rules. Design/methodology/approach -The analysis is based on a survey involving 84 financial firms (banks, investment companies and insurance companies). Two criteria have been used to interpret the results: the prevailing workability within international and domestic intermediaries; the intermediary typology, creating a distinction between banks other financial intermediaries (FIs) and insurance companies. Findings -Italian financial firms are sensitive to minimise sanctions, but the reputational impact is becoming more important. International firms are more sophisticated than domestic ones for their ability to measure both the probability of non-compliance events and their severity. Banks show the highest attitude to adopt insurance or financial contracts to minimise the negative impact of non-compliant behaviours. Small FIs are late in measuring the exposure and losses due to non-compliance actions. Originality/value -Four years after the Basel Document on compliance, a large percentage of firms is still managing the process within a function with different purposes; nevertheless, reputational impact has become more important. Small intermediaries show a lower attitude to implement a risk management approach, with a capital management sensitivity. This finding addresses the question about the existence of size effect which could reduce the compliance attitude.

Public finance regulatory compliance among public secondary schools

“…As such, we pay attention to the effectiveness of their operations, through adherence to regulations. Third, compliance studies have largely focussed on financial institutions especially in the wake of the global financial crisis (Birindelli and Ferretti, 2013;Gabbi et al, 2011;Sejjaaka, 2005) neglecting other institutions in the same operational environment. Adherence to the public financial regulations enhances society's trust in government and confidence on proper utilisation of the entrusted public resources.…”

Identifying the volatility of compliance risks for the pension custodian banks

“…In turn, scholars address the following aspects in the study reports: implementing the compliance functions in banks (Singh, 2003;Edwards & Wolfe, 2004;Haynes, 2005;Misha, 2016); functional duties and roles of bank compliance officers (Fox, 1999;Meissner, 2018); assessing the compliance risks and their consequences, and compliance risk management (Haddad, 2016 According to analytical studies (Birindelli & Feretti, 2008) on the identification of compliance regularities and, specifically, the comparison of compliance systems used by Italian banks and structural subdivisions of foreign banking groups, the latter seem to pay more attention to compliance issues. Gabbi et al (2011) also factored in the criterion of international activity while cross-checking various groups of financial institutions (banks, insurance and investment companies) and pointed out that financial go-betweens with foreign capital appeared to be more experienced in terms of their ability to assess compliance risks and recognize their danger.…”

“…In addition, Gabbi et al (2011) Considering the need to achieve the synergy between the objectives of compliance functions and risk management in banks (Fox, 1999), Edwards and Wolfe (2007) and Mikes (2008) studied certain aspects concerning the significance of compliance with regulatory requirements and the improvement of compliance functions and risk management not only for financial institutions, but also for their stakeholders. Edwards and Wolfe (2007) point out that an important aspect of day-to-day life of any corporate business, especially financial institutions of the United Kingdom, implies the ability to demonstrate the compliance with and competence in regulatory requirements to regulators and other third parties.…”

Do IT audits satisfy senior manager expectations?

“…Furthermore, large and small banks differ in terms of their business model characteristics, organisational structures and operational processes (Gabbi et al, 2011). Prior empirical research (Protiviti, 2012) has indicated that the company's size could affect IT auditing's effectiveness because, in small organisations, the IT audit unit is often understaffed and the IT auditors' involvement in technological projects is rather limited.…”