Accountants Say Complex Regulations Hinder Business Growth
If you’re feeling swamped by ever-increasing and complex regulations, you’re hardly alone.
More than 300 accounting, business, and finance professionals from around the world responded to the International Federation of Accountants’ (IFAC) recentGlobal Regulation Survey, and most of them said regulation is eating away at their organizations’ ability to grow and innovate, that the complexity has grown in the past five years, and that it substantially increases the cost of doing business.
The bottom-line takeaway from the survey: There’s nothing wrong with properly crafted and applied regulatory measures, and they can be a boon to businesses everywhere. But when they are so complex and costly that they hinder business growth, it creates a drag on the global economy.
“Good regulation is essential to the fairness, efficiency, and effectiveness of economies, and making it work as well as it can is a never-ending mission,” IFAC CEO Fayez Choudhury said in a prepared statement. “Growth remains a concern globally, and these results should be a wake-up call for us to examine the impact of regulation, including the regulation and reform introduced in response to the global financial crisis.”
- Forty-six percent of respondents said collaboration among regulators is ineffective.
- Eighty-five percent of respondents expect regulatory impacts to intensify during the next five years.
- Thirty-six percent of respondents indicated regulations across regions are inconsistent.
He offered some examples of how regulations have become more complex. For instance, the Glass-Steagall Act (provisions that were part of the Banking Act of 1933 that, among other things, limited banks’ investment and securities activities) that was passed after the Great Depression was 37 pages. The Dodd-Frank Wall Street Reform and Consumer Protection Act of 2010 is more than 2,000 pages. The first Basel Accord in 1988 had seven risk categories requiring seven calculations. Basel III has more than 200,000 risk categories and more than 200 million calculations, according to Bank of England Chief Economist Andrew Haldane.
“There are urgent questions surrounding regulation’s impact on growth and innovation, as well as how its complexity is affecting the agility needed to face emerging risks and potentially the next financial crisis,” Choudhury said. “IFAC aims to collaborate with policymakers, regulators, and the organizations impacted to examine these questions and probe the impacts as a major priority.”