Around the globe, the investment and fund management industry is implementing new requirements and responding to supervisory requests and reviews.
And there are more changes on the horizon. Within Europe, the reviews of post-crisis regulation will generate a considerable amount of discussion and potential rule changes over the next three years, and other legislative initiatives are underway under the “Capital Markets union” (CMU) banner.
The likely impacts and consequences of key political events in 2016 and 2017 underline that financial services regulation is not the sole prerogative of regulators. Geo-political risks are not new for the industry. At present, though, there is heightened awareness of the direct impact that these risks are having on regulation, both prospective rules and the supervisory approach to existing requirements. The potential for unexpected policy U-turns is making firms cautious about future business plans.
The drivers for regulatory change differ between jurisdictions, but there are common themes. The industry is increasingly being challenged about its business model, commercial relationships, customer propositions and its role in global capital markets. Its role in and impact on the global capital markets is being scrutinized, across the piece but, in particular, in those areas where the industry is growing, such as exchange-traded funds. At the same time, policy makers seek the industry’s support in providing retirement savings and supporting economic growth. KPMG’s 2017 Evolving Investment Management Regulation report discusses the key regulatory themes:
The combination of a heavy regulatory agenda and an uncertain path underlines the need for firms to remain alert throughout 2017 to intense regulatory and media scrutiny of the sector, while implementing new rules. Successful firms will challenge and adapt their financial and operational models. They will have in place efficient and effective mechanisms for the identification of, planning for and implementation of regulatory change.
Questions for CEOs
• Is our culture and conduct good across all levels and all departments?
• Are we challenging our approach to costs and charges, and their disclosure?
• Are we prepared for fundamental changes to current cross-border distribution models?
• Are we prepared for increased demands from regulators for data?
• Are we keeping pace with new technologies and operational risks?
• What is our process for identifying, planning for and implementing regulatory change?
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Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm.