Nine in 10 European compliance professionals are struggling to cope with the increasing number and complexity of overlapping regulatory directives at global, regional and local levels, according to Ernst & Young’s fourth Compliance Management for Asset Management Survey.

The survey, which compared the views of 42 heads of compliance, legal and chief compliance officers from some of the most recognised asset managers in Europe, found severe regulatory fatigue is likely to be a persistent theme over the next five years.

The highest priority measures for heads of compliance, by way of both priority and impact, were the Alternative Investment Fund Managers Directive (AIFMD), Undertakings for Collective Instruments in Transferable Securities (UCITS) IV and V, and the Foreign Account Tax Compliance Act.

Measures growing in priority include Capital Requirement Directives, Solvency II, and Market Abuse Directive II. Other measures known, but whose effects remain unknown, include Shadow Banking Resolution, EU Banking Union/Liikanen, Central Securities Depository Regulation, and the Financial Transaction Tax.

“The overwhelming message from this survey is that while the AIFMD and the FATCA pose the biggest individual problems for managers in the short term, it is the sheer volume and constant fluctuation of regulatory policy that is creating the biggest headache for compliance teams,” Ernst & Young’s head of asset management Gill Lofts said.

“The industry runs the risk of being so overloaded with regulatory change at a regional and local level that it cannot implement it effectively, potentially jeopardising all the efforts of regulators and industry alike to make the industry safer.”

A total 79 per cent cited the number of regulations to manage as the top compliance risk. The second area of most concern, according to 63 per cent, referred to the repeated “stop-go” changes facing the various regulatory issues and prioritisations.

There has been a steep year-on-year increase in asset management firms wishing to avoid reputational damage following potential regulatory breaches; 58 per cent were concerned about reputational damage last year, while 81 per cent expressed concern this year.