Addressing the challenges for compliance for the Swedish financial sector – management of risk and costs for compliance

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Claes Norgren, Managing Director IBM Promontory

Compliance in the financial sector is a critical aspect to ensure that financial institutions adhere to the rules and regulations that govern their operations. With technological advancements in recent years, it has become increasingly important for financial institutions to understand the impact on compliance in order to benefit from the new possibilities they entail.

I recently convened a seminar in Stockholm, where we brought together industry experts, regulators, and compliance professionals to discuss the challenges and opportunities that technology presents for compliance in the Swedish financial sector.

Vahid Zohali, General Manager IBM Sweden opened the dialog and made the following remark, “There is a great need and value to communicate at the industry level to ensure common interpretation.”

Together with Andreas Widegren, Head of Regulatory Advisory at Swedbank, and Chair of European Cloud User Coalition, and Jimi Inge, advisors in compliance, RegTech and business development for European banks at IBM, we discussed the legislation Swedish banking industry must comply with, a minimum of 30 000 obligations of both EU and Swedish legislation – and the number keeps growing every year. The amount of legislation and consequently the costs involved in complying with an increasing burden of regulations have therefore increased dramatically in the last decade. Is it even possible for humans to keep track and abide by these regulations without financial institutions budgeting for an army of compliance experts?

Andreas Widegren from Swedbank presented three key takeaways from the seminar:

1. Communication and knowledge sharing in compliance in relation to industry colleagues and the internal organization is key.
2. Start the processes for implementation in compliance as early as possible, don’t wait for the final regulatory texts!
3. You need to build a culture around compliance, only then will we automatically build in security mechanisms and ensure that decisions are made on the right grounds.

In compliance a strong wind of change has occurred during recent years raising the bar for management and boards in banks.

“Change has taken place, where regulations focused on liquidity and capital in banks. Nowadays, there is an increased focus on in parallel strengthening operational risks, e.g., consumer protection monitoring.”

Claes Norgren

Enterprises are also rapidly modernizing to meet the demands of today’s digital-first consumers. While convenience is key, these same enterprises must put the security of data above all else, protecting it from third- or fourth-party risk. For highly regulated industries, those that are charged with safeguarding the most sensitive data, the stakes are high. Threats have become more sophisticated, security and compliance regulations continue to evolve, yet consumer expectations for convenient and frictionless experiences are at an all-time high.

According to IBM, financial institutions spend considerable amounts of their budgets on costs related to complying with EU law. At the same time, the current economic climate is looking rather gloomy with inflation rates rising to 9% and a recession lurking around the corner. In terms of digital development, it has been questioned whether Swedish companies as well as public actors are investing enough capital in securing Sweden’s position as a leader in digital transformation. With advancements in artificial intelligence, machine learning, and data analytics, financial institutions must invest in the latest technology to keep up with evolving regulatory requirements.

“Legal certainty is a prerequisite and will make or break it, because it creates uncertainty. Major investments are required, and at the same time, it is impossible for a larger institution not to make a cloud journey. We need to make these investments, but the lack of legal clarity makes the industry hesitant – hence the balancing act is necessary.”

Andreas Widegren

Companies all around the globe need to make these investments effectively. We are also seeing an important role for hybrid cloud capabilities and industry clouds with built-in compliance and security controls. These specialised cloud platforms are vital to reducing risk throughout the industry, particularly to help facilitate secure and compliant collaboration between banks and ecosystem partners.

IBM Cloud is designed for organizations that want a security-rich, open, hybrid, multi-cloud, and manageable cloud environment. IBM Cloud compliance and trust certifications reaffirm IBM’s commitment to protection of customer data and applications. Designed with secure engineering practices, the IBM Cloud platform features layered security controls across network and infrastructure. 

Regulatory compliance meet challenges , especially when your data is scattered across many vendors. We see in our dialogues with the banks that the main challenge is to drive innovation together with compliance, especially as data sources increase and data is found in more and more places. And that data is moved more often between data sources and needs to be portable. But does it have to be so difficult?

Our goal is to help our clients modernize and drive innovation with compliance wherever data resides. Our idea for a solution is dialogue together with our customers and those who write the regulations to find flexible and sustainable solutions going forward. IBM has several forums where banks and institutions meet to shape our services and technology so that they fit reality.

“Technology solves problems. If we have the right technical tools, we can ensure that we are compliant, and make decisions based on the right grounds. Technology creates transformation, it creates compliance especially regarding the outsourcing journey we all face.”

Andreas Widegren

Over the next few years, as technologies such as cloud computing and AI continue to gain momentum, the quality of collaboration and dialogue among policymakers, regulators, banking supervisors, and the industry will become increasingly vital. Despite the undeniable complexity of the existing regulatory framework for financial services, IBM is fully committed to promoting precise regulation that encourages reliable and transparent innovation and delivers positive results throughout the ecosystem.

Executive summary
IBM reports that financial institutions allocate large amounts of their budgets towards adhering to EU regulations. The interpretation and potential future changes to legislation can create uncertainty, which can have significant implications. Large investments are necessary, and it is difficult for a major institution to not embark on a cloud journey. Companies worldwide must make these investments effectively, and IBM Cloud® is an ideal solution for organizations seeking a secure, open, hybrid, multi-cloud, and easy-to-manage cloud environment. IBM Cloud compliance and trust certifications serve as evidence of IBM’s commitment to safeguarding customer data and applications.