Dresdner explains benefits of 'global' approach to compliance

Aug 07 2006 Martin Coyle

The recent restructuring of Dresdner Bank into two distinct units has led to a sea change in the firm's approach to compliance, according to compliance officials. The restructuring programme, which was announced in June, saw the bank split into two clear business units. One side deals with private and business customers and the other deals with investment banking under a new name Dresdner Kleinwort. The overall shake-up has caused the bank to adopt a more centralised "global" approach to compliance, officials said.

Complinet spoke to Dr Dirk Scherp, group head of compliance for Dresdner, and Will Dennis, managing director and head of compliance for Dresdner Kleinwort London. Both have played an important part in implementing the changes.

Scherp said the intention was to create one strong sense of compliance throughout the group. "The restructuring will also create a more independent compliance function, with compliance working in one clear consistent way throughout the group," he said.

"One of the aims of the redesign of compliance also was to build up, even more than we ever had, a common ideal for compliance for all compliance representatives in the Dresdner group globally", he said.

If countries or business areas required different standards of regulation the bank preferred to adopt the highest standard as a common denominator, he added.

"We want one common sense of compliance. Compliance officers in the future will report directly to the global head of compliance and will be part of the compliance function and not part of separate business lines or a global chief organisational officer line," Scherp explained.

Interactive policy

The compliance chief said that 80 per cent of the restructuring was now complete, with one of the benefits being that compliance people from different business areas and countries were increasingly interacting more and discussing common themes and issues more readily with each other.

Dennis said it would be quite difficult to measure the benefits of the change. He said that even if the firm saw a lower turnover in compliance staff, however, it would be judged as a success. He said the changes had already brought more stability to the compliance team in London. Dresdner has recently hired David Cooper from HSBC to be responsible for compliance in the investment bank's capital markets business.

"It is quite difficult to put a measure on successful compliance. It's a bit like the theory about having more police leading to greater crime statistics, when actually more police means greater discovery of crime. Similarly, I don't think you can say reduced attention from regulators necessarily means better compliance," Dennis said.

Dennis, who joined from Lazard around three months ago, said that senior managers had embraced compliance in recent years. There had also been greater reporting of compliance issues to senior managers because there was greater interest from this level, he said.

"I have always regarded it as absolutely essential to ensure that senior management understand what compliance is doing. It is not hard to get senior management buy-in these days, but it might have been the case some years ago. When you read about US and UK regulators focusing on senior management responsibility, you get them clamouring to get involved," he explained.

Changing attitudes

The change in attitude is reflected in the internal senior management training courses that the bank runs, which tend to be well populated, Dennis said. Scherp added that, on the training front, Dresdner would make a move towards running courses globally with a centralised procedure. This would enable people to get the same knowledge about compliance and the compliance culture, he suggested.

As with other large banks, the looming shadow of the Markets in Financial Instruments Directive hangs over Dresdner. The bank is devoting a lot of time and resources to ensure that it will be ready for the 2007 deadline. Dennis praised the Financial Services Authority's work in the area and said the regulator was ahead of its European counterparts in terms of its preparedness.

Scherp said that although the bank could not start its implementation programme yet, it was still possible to second-guess much of the directive. Preparations for the group-wide implementation, meanwhile, were underway. He added that because of MiFID banks would need to hire more good staff in the coming months.

Dennis has seen no real conflict between the FSA's principles-led approach and the more rules-based approach inherent in MiFID. The differences in approaches taken by the FSA and Securities and Exchange Commission had increased Dresdner's legal bills, however.

He said that not many people in the market were prepared to trust their own judgement when it came to US regulation. The "NatWest Three" case has heightened this fear, he believed. He said the bank was unlikely to face a similar issue but said that US extra-territoriality issues were a concern.

"It seems to me odd that you can do something that is lawful in your own country and your own regulators and prosecutors decide not to proceed with and yet you find yourself in the dock in the US. We just have to be extremely careful and very cautious, which is no more than we should be anyway, but it has been a wake up call to the industry," he said.

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