Evolving Banking Regulation – Part 1 | KPMG | BE

Evolving Banking Regulation: from Design to Implementation

Evolving Banking Regulation: Design to Implementation

This report looks at recent and forthcoming banking regulation in EMA.

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Illuminated runway

The 2015 edition of Europe, Middle East and Africa’s (EMA’s) Evolving Banking Regulation will be published as a series of papers, beginning with Part One: From Design to Implementation. This report looks at recent and forthcoming banking regulation to set the stage for further chapters focusing on specific issues. The first such chapter, Part Two: Bank Structure: The Search for a Viable Strategy will be published in April. Other subject-specific chapters will follow during the year, and are likely to focus on conduct and culture, governance, data, market infrastructure and resolution. 

From design to implementation

The detail of regulatory reforms is beginning to become clearer, as is the direction of travel of the remaining reforms. The volume of unfinished business is diminishing as more regulations are moving through the design and calibration stages to implementation, and fewer regulatory reform initiatives remain at an earlier development stage. However, some uncertainty inevitably remains about the prospective appearance of new initiatives.

Meanwhile, banks continue to grapple with the complexity of keeping track of and adjusting to the sheer volume of measures and the multiple interactions between them. This chapter focuses on five emerging areas where banks will need to respond to the uncertain evolution of regulatory and supervisory developments.

  1. Macro-prudential policy
  2. Risk weighted assets
  3. Comprehensive Assessment
  4. Supervision
  5. MREL and TLAC

Weak economic activity and regulatory pressures have left many banks in the EMA region struggling to generate adequate profits, and to demonstrate that they have a viable and sustainable business model. Deleveraging and de-risking the balance sheet may have enabled most banks to meet current regulatory demands for capital and liquidity, but it will not rebuild banks’ profitability. The headwinds of the costs of past misconduct in both retail and wholesale markets, and the myriad pressures to increase IT expenditure, do not make it any easier for banks to secure a viable and sustainable future. These issues are covered in more detail in Part Two of Evolving Banking Regulation

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