10 key banking and capital markets regulatory challenges in 2017

Banking and capital markets regulatory challenges 2017

With the arrival of 2017, KPMG has outlined 10 key new and ongoing regulatory themes that we expect will demand the attention of the banking and capital markets industry in the coming year.

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Financial institutions (FIs) in Australia and internationally will continue to see a focus on governance and conduct, while the implementation of new capital requirements and technology will provide both challenge and opportunity.

Political changes in the United States and Europe have introduced uncertainty into an international regime that had previously, for the most part, provided a reasonably clear regulatory program.

10 key regulatory issues

Our 10 key regulatory issues that are likely to impact the industry through 2017 are:

1. Political uncertainly – Brexit, Trump and EU dynamics

While international uncertainties do not directly impact Australian regulation, it would be fair to assume that APRA and ASIC are closely monitoring developments. The implications will impact domestic and off-shore business plans.

2. Governance, culture and conduct

In 2017, we expect the focus on governance, culture and conduct to further extend with an increase in investigations, remediation programs and the introduction of sophisticated monitoring capabilities.

3. Digital transformation

The last 12 months has seen a significant evolution in the digital agenda. We see a number of specific components playing out this year in the areas of regtech and artificial intelligence and robotics.

4. Capital and liquidity

Current efforts to formalise the link between capital, funding and liquidity management include the Fundamental Review of the Trading Book (FRTB), an extensive refresh of the standardised credit risk regulatory capital standards (SA-CCR), a recommendation to implement a domestic total loss absorbing capacity (TLAC) framework – just to name a few.

5. Risk function of the future

Risk must innovate its operations, challenge traditions, push boundaries, be more forward focused and step into a leadership role in order to steer organisations through immense challenges in a technology powered world.

6. IFRS 9

For the larger banks, the commercial impacts of the new financial instruments standard, which becomes effective from the first financial year after January 2018, are wide-ranging.

7. Responding to the New Payments Platform (NPP)

The innovations which the NPP will enable are exciting for banks and their customers, but as implementation comes closer, regulations and risk management will need to adapt to a near real-time world.

8. OTC clearing and margining – call to arms

To date, OTC reforms have largely been limited to the inter-bank/broker market and large highly sophisticated financial counterparties. Through 2017, global regulators including Australia will require a new wave of participants to meet central clearing and daily margin requirements.

9. Data – sharing, quality, aggregation and reporting

Globally, anticipated new requirements and regulation which would likely require organisations to track and evaluate aggregate exposure to a single counterparty across the consolidated firm on a daily basis are fuelling the industry’s data concerns.

10. Cyber security, on-boarding and privacy

Protecting the security and confidentiality of customer information and records is of paramount concern to institutions and regulators alike, as FIs are increasingly dependent on information technology and telecommunications to deliver services to their consumer and business customers.

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