Compliance/Deutsche Bank: risk wait | Financial Times


City bosses admire mavericks, just not in their own firms please. For this reason, compliance has been a growth area in finance for a decade. Not for much longer. Institutions, such as Deutsche Bank, use contractors to keep a lid on full-time employee headcounts, including within compliance. An imminent change in the rules for freelance workers, known as IR35, has negative implications for contractors. They could end up paid less, sometimes as full-time employees. But the bad news is that compliance employment in the City shows signs of peaking.

Some compliance-related contractors may leave the German bank, the Financial Times reported on Wednesday. The tax ruling will come into force from April. This affects only about 50 workers within the more than 1,500 involved in the bank’s anti-financial crime unit (AFC), says Deutsche Bank. But more important is that contractors tend to cost more than full-time employees, even though freelancers do not receive benefits such as pensions and insurance. No surprise that the bank plans to move some of these functions into cheaper regimes such as Romania and India.

Yet maintaining compliance teams, whatever insurance they provide for those occupying the executive suites, is pricey. Over the past five years headcount in compliance has jumped, especially on AFC. Deutsche admits that personnel for this unit has more than doubled in that period to over 1,500. Moreover, full-time salaries have jumped in compliance, up to 25 per cent for senior managers, say specialist headhunters Morgan McKinley. No wonder then that the recruiter noted a sizeable drop in its permanent assignments, down by nearly half last year over 2018. Deutsche thinks its AFC team headcount will peak this year. Others such as Barclays expect overall compliance costs to fall this year.

READ  Dow closes Friday with modest loss, but ends with first weekly gain in December

Deutsche Bank touts its compliance efforts as strong and unyielding. But rising costs, and now a UK tax hassle, encourage banks to reconsider how they pay relevant staff. No matter what, the era of costly compliance teams in the City has ended.

Our popular newsletter for premium subscribers Best of Lex is published twice weekly. Please sign up here



READ SOURCE

LEAVE A REPLY

Please enter your comment!
Please enter your name here