"We'd love to be in compliance but it's just too expensive."
Get ready to hear this refrain in the coming weeks and months as the multitude of elements of the Dodd-Frank law come into effect. Wall Street will wail about the cost of being compliant even as they spend on lobbyists to dial back the reform. In the mean time, who is caught in the middle? The technologists, as usual.
IT dollars have flat-lined since the days of the mortgage collapse of 2008 and any uptick in spending has been minimal at best. As my colleague Justin Grant of Advanced Trading reports, the budget proposals for IT projects will remain modest and cost-savings is still one of the main drivers for choosing new technology and launching new projects. Just look at the popularity of cloud computing.
With these near flat IT budgets and focus on savings, you'd think the major investment firms were struggling. Far from it, in fact. Wall Street posted record profits and this year's bonus season is looking to be the strongest ever.
But as Dodd-Frank starts to take effect with its cascading deadlines, banks will no doubt play a familiar tune. They will stall the regulators, claim that the government's technology demands are unrealistic, demand more time to create long elusive standards and once the deadlines come, mutter the appropriate noises to placate regulators. Just look at the European investment banks when MiFID was due in November 2007. Most either firms started or completed their transparency projects, while others wrote a letter stating that they intended to be in compliance.
I wish I knew that trick back in high school when my book reports were due. "Dear Teacher, I have every intention of reading Dombey and Son..."
Call me a cynic but I can see the same thing happening with Dodd-Frank. Under Title I of Dodd-Frank, firms are required to get their data in order and submit it to the SEC and the Treasury department to show that they are not in danger of collapse or pose a risk to their counterparts and the overall financial system. The firms have a big job ahead of them: data management is dull, unsexy work and the lack of standards has long vexed -- and bored -- the industry. Now they have to get their act together or the government will do it for them.
Cue the whining about the lack of tech dollars. We all know the words to this song.Phil Albinus is the former editor-in-chief of Advanced Trading. He has nearly two decades of journalism experience and has been covering financial technology and regulation for nine years. Before joining Advanced Trading, he served as editor of Waters, a monthly trade journal ... View Full Bio