ONE Eye On The Future

For the forward thinking professional.

Is "Reg-Debt" the silent killer?


3,780 days have passed since Lehmann Brothers filed for Chapter 11 bankruptcy.

About $1.4 trillion in annual economic output will never be recovered, in the US alone. More than 10 years later, the aftereffects of that debacle are being felt even today. Trust and confidence in financial institutions is regularly challenged. At the same time, trust in financial institutions is important for keeping the economy stable.




Let’s rewind to 2008. The entire financial system was so loose that it could not detect the risks building. This led to banks building debt with little equity which they could not cover up during crisis. This resulted in banks being bailed out at taxpayers’ (consumers’) expenses. Post the crisis, many financial institutions were either merged or nationalised, resulting in big becoming bigger. A handful of large institutions were the epicentre of most of the risk being taken on by the industry – but they also got to be the market makers.

How has that world changed in 2019? If anything, the problem is more severe. And it is due to one major factor: reg-debt.

What is reg-debt? You might have heard of technical debt.

"Technical debt (also known as design debt or code debt) is a concept in software development that reflects the implied cost of additional rework caused by choosing an easy solution now instead of using a better approach that would take longer." Source: Wikipedia

The same concept exists for regulation.

Let’s look into how that happens. Ever since the financial crisis, there has been increased scrutiny on how much focus an organisation places on profitability vs. their customer interests. When the two align – great! But when they don’t, that’s when regulators believe they need to step in. The more discrepancies they can find, the more regulation changes are introduced. The tighter the regulations. With every mistake caught, their scope becomes broader.

As a result, we find ourselves in a world where 125 regulation changes affect a global financial organisation on a daily basis. That is a change every 12 mins. Deadlines are strict and because the focus of the organisation isn’t entirely where it needs to be, companies deploy patchy fixes. In most cases, this only delays the inevitable: where the regulator needs to step in again. And reg debt builds.

This is a vicious cycle we need to get out of.

There are indeed challenges in keeping up with new regulations and changes to existing regulations, but with challenge comes opportunity. This is the opportunity for financial organisations to look at how compliance can be managed in a more innovate and effective way. Innovative technologies are already here. These can not only help you keep up with latest developments in regulations, but also be applied to provide information in different forms for various management levels, financial reporting, regulatory and consumer selling purposes.

Smooth processes, consistent information and unified data flows across the value chain is important for the success of any industry.  It is crucial to understand the financial services value chain and the role played by each link in the chain - the financial services organisations, counter-parties, asset management companies, pension funds, insurance companies, regulators, etc. and the impact of their actions and decisions on the end consumer.

Ask yourself these questions, and answer honestly:

  • Is there a high level of confidence in financial services industry today?
  • How often are consumers risked with lower returns on investment?
  • How often is the blame put on economic conditions, market volatility and so on, instead of lack of duty of care?
  • Is the global financial system as exposed and vulnerable as it was in 2007?
  • Is your reg-debt building?

The big banks are now too big to be saved by the government if another crisis were to occur. Reg-debt has the potential to paralyse the smaller players, if it isn’t controlled and managed carefully. Technology has a role to play in that, but only if matched with a whole new methodology and mindset for managing risk; one that is far more cognisant of culture, commerciality and technology than the “just get it done” patchy fixes.



Neeta is a co-founder at RequirementONE with immense experience in scaling start-ups and driving business outcomes. She has built successful, profitable and scalable businesses and led strategic mergers & acquisitions. Neeta is on the board of Young Women’s Trust (UK), on the committee of Women in Banking and Finance, and a mentor with the Cherie Blair Foundation. To learn more reg-debt from Neeta, please get in touch at