Systematic analysis of regulatory compliance challenges in multinational banking operations post-financial crisis

Posted: Dec 17, 2024

• Dr. Prof. Victor Johansson
• Dr. Prof. Victoria Ivanov
• Dr. Prof. Victoria Müller

Abstract

This research presents a comprehensive investigation into the evolving landscape of regulatory compliance challenges facing multinational banking institutions in the decade following the 2008 global financial crisis. The study employs a novel methodological framework that integrates computational text analysis of regulatory documents with network theory applications to map the complex interdependencies between regulatory requirements across multiple jurisdictions. Our approach represents a significant departure from traditional compliance research by treating regulatory frameworks as dynamic, interconnected systems rather than static collections of individual rules. We analyzed over 15,000 regulatory documents from 27 jurisdictions between 2009 and 2019, identifying patterns of regulatory divergence and convergence that create unique operational challenges for global financial institutions. The research reveals that the post-crisis regulatory environment has generated what we term 'regulatory entanglement' – a phenomenon where overlapping, sometimes contradictory requirements create compliance bottlenecks that traditional risk management frameworks fail to adequately address. Our findings demonstrate that compliance costs have evolved non-linearly, with the complexity of managing cross-border regulatory interfaces accounting for approximately 42% of total compliance expenditures in multinational banks by 2019, compared to just 18% in 2009. The study introduces a new metric, the Regulatory Complexity Index (RCI), which quantifies the computational burden of compliance across multiple jurisdictions and provides financial institutions with a predictive tool for anticipating future compliance challenges. This research contributes to both academic understanding and practical applications by offering a systematic approach to navigating the increasingly complex global regulatory landscape, with implications for regulatory design, compliance strategy, and international financial stability.