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As incumbent retail and commercial banks continue to shape their vision of the future and their capacity for achieving digital transformation, the opportunities and risks are increasing. In our previous blog we explored where incumbents should play to hedge against regulatory risk by assessing their digital transformation target and their geographic footprint. In light of this, how should incumbents play to win? In this blog, we explore how incumbents can secure the value of their digital transformation through a three-pronged approach.
FCA consults on measures to protect retail investors in open-ended funds investing in illiquid assets
The FCA is consulting on measures intended to reduce the risk of poor outcomes for retail investors in open-ended funds that invest predominantly in illiquid assets (such as property or infrastructure), following its 2017 discussion paper on this topic. In stressed market conditions, such investors may be unable to redeem their investments at short notice or only be able to do so at a substantial discount to the unit price.
As regulators continue to develop their response to disruptive innovation, the regulatory risk – what type of regulatory change will occur in response to innovation – for incumbents is increasing. In our previous blog we explored how regulators may respond to innovation by presenting two forward-looking regulatory scenarios. In light of this, how should incumbents approach their digital transformation? In this blog, we explore where incumbents should play to hedge against regulatory risk by assessing their optimal digital transformation target and their geographic footprint.
There is widespread consensus that incumbent retail and commercial banks will need to redefine their business models over the next five to ten years to remain viable. Two forces will play a fundamental role in determining the speed of change and the end-point toward which incumbents will move. The first force concerns incumbents’ vision of the future and their capacity for achieving digital transformation alongside the success of new digital native competitors. The second force concerns the role of financial regulators and supervisors as drivers of, or brakes on, digital transformation. Whilst digital transformation typically factors in regulatory compliance based on the current regulatory state of play, it does not tend to factor in regulatory risk. In this series “Digital transformation meets regulation 4.0: Playing and winning in 2030”, we present a way of thinking about how incumbents could play and win to hedge the value of their digital transformation against regulatory change.
The European Central Bank (ECB) has published details of how it expects banks to manage the process of setting and executing their business strategy. This brings some clarity to the long-standing question of how recent supervisory focus on business models – it is again one of the ECB’s priorities for the year – will translate into action for banks, but in the process introduces an expectation that banks make significant investments in their capabilities in this area.
On Wednesday 19 September 2018 the Prudential Regulation Authority (“PRA”) and Financial Conduct Authority (“FCA”) wrote to the CEOs of major banks and insurance companies regarding the ongoing global benchmark reform effort, specifically the transition from LIBOR to alternative rates.
Many senior leaders are keen to open a dialogue with us about how they can introduce their teams to more agile ways of working. The question tends to come in many different forms, with a variety of motivations, however is often seeking a similar outcome: how can we help our teams to sustainably reduce the lead-time to deliver working value to our customers?
As the fight against money laundering continues to evolve rapidly, on 12 September 2018, approximately 6 months after the implementation of the 5th EU Anti-Money Laundering Directive (5AMLD), the European Parliament adopted further amendments to the relevant criminal law in order to strengthen and advance the fight against money laundering. Whilst these have a long way to go before they are finalised, there is value in looking now at some of the proposed amendments, such that firms and our clients are aware of what may be needed or expected of them in the near future.
When the Apache attack helicopter was developed it included a monocle for the pilot which gave a heads up display to their right eye featuring a plethora of high level information - keeping an eye on things became a more challenging task when you had to divide your vision to get a holistic view of the battlefield.
The EU Benchmarks Regulation (“BMR”) went live on 1 January 2018, forming part of the EU’s response to concerns over the reliability and integrity of financial benchmarks. BMR provides a harmonised framework to ensure clients investing in these regulated products are protected from the risk of benchmark manipulation. The majority of focus to date has been on the administrators of benchmarks largely because of the steps required to evidence compliance. The UK is leading the way in registration and authorisation as shown by ESMAs published register.
In our recent paper on Culture in Financial Services, we highlighted that one of the key questions supervisors consider when assessing a firm’s culture is whether it promotes constructive challenge at all levels in the organisation. The underlying supervisory concern is whether there is any tendency towards “group-think”, especially at board level.