The flood is continuing – Regulatory update

Once again the regulatory agenda dominates the agenda for our customers. The volume and pace of regulatory change is at an unprecedented level and this is set to continue in 2017 for a number of key reasons.

There are over 700 regulatory and policy issuing bodies globally and in 2015 they issued more than 60,000 updates to new and existing regulations or rulebooks. These numbers have been increasing exponentially over the last few years and we expect this trend to continue in 2017. Whilst there have been technology developments which have helped to capture these items, enabling an organisation to understand and action these items will be of considerable focus for banks.

There are a number of major regulatory changes which banks are preparing for implementation in 2017 and 2018. In investment banking, the Markets in Financial Instruments Directive (MiFID II) and the Fundamental Review of the Trading Book (FRTB) both present challenges in ensuring key data elements are stored and distributed accurately and efficiently across the bank and used to provide correct calculations and reporting to regulators and the public.

In the retail sector, regulators are now opening up the environment for non-financial intuitions, using regulation as a competitive leaver. By mandating a common standard for open APIs (Application Programming Interfaces) this facilitates new entrants into the market. The implementation of PSD2 (Payments Services Directive) in Europe will also require banks to open access to customers’ account data and give third party providers the ability to initiate payments. This provides both a threat and an opportunity to incumbents, by potentially broadening service offerings but also opening the market more widely to competitors.

Finally, one of the biggest challenges to emerge in 2017, is regulatory uncertainty. The UK voting to leave the EU has cast a shadow over the future of a harmonized regulatory environment in Europe, despite pledges by the UK government to continue to implement upcoming EU regulatory changes. In the US, Donald Trump’s victory in the presidential election brings the prospect of major regulatory reform with the possible repeal of the Dodd-Frank act and a return to a lighter regulatory regime. This would clearly have repercussions for all regulators and therefore banks around the globe.