A comprehensive review of literature on compliance function post-Basel III

Federica Castro, Laura Leonori and Saverio Giorgio

Journal of Financial Regulation and Compliance, 2025, vol. 34, issue 3, 466-495

Abstract: PurposeThis paper aims at analysing how regulatory changes, introduced post-Basel III, have shaped the role of Compliance Function (CF) in “financial institutions”, where “banks” are the cynosure of the research.Design/methodology/approachThis study combines a systematic literature review with content analysis to classify the selected sample into clusters and respective sub-clusters.FindingsThis research identifies six clusters underscoring the pivotal role of CF to address the challenges that all “financial institutions” – banks, financial investment firms, insurance companies and other types of financial intermediaries, including those structured as FinTech companies – face to adopt provisions of the financial regulatory framework and to observe good operational practices.Research limitations/implicationsThe analysis mainly focuses on European institutions, making the results less applicable to other contexts with different financial systems and regulations. As a result, global compliance challenges, especially in emerging markets or less harmonised systems, may not be fully represented.Practical implicationsFrom the perspective of financial institutions and regulatory authorities, this paper confirms the centrality of the CF in a dynamic environment, enhancing the organisation’s strategic resources. The results contribute to implementing best practices for the CF, thereby achieving efficiency, resilience, profitability and stability across all financial institutions.Social implicationsThe CF serves as a critical safeguard against banking crises by ensuring adherence to regulatory frameworks and fostering sound risk management practices. A robust compliance culture mitigates systemic and idiosyncratic risks, reducing the likelihood of misconduct and financial malfeasance that could lead to widespread economic consequences.Originality/valueThis paper has highlighted which aspects of CF are most investigated in the literature, outlining a clear path of its activities and clearly recognising the strategic role in the organisations.

Keywords: Crisis management; Compliance function; Banking; Regulatory compliance; RegTech; Internal governance (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eme:jfrcpp:jfrc-04-2025-0093

DOI: 10.1108/JFRC-04-2025-0093

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