2017 may be the year in which that global regulatory consensus cracks under the weight of the many ongoing social and political pressures Financial Services organisations are facing.
Financial institutions are hoping 2017 brings a little more certainty as they grapple with the challenge of Brexit. They may not get it. Donald Trump’s victory in November and Matteo Renzi’s fall less than a month later, show how social and political change is challenging the established order. Elections in the Netherlands and France next year could further shake the consensus.
The backdrop as Brexit talks begin in the spring of 2017, is one in which emotions threaten to crowd out business logic. And this mood has implications for banking and capital markets. In the wake of the 2008 financial crisis, regulators coordinated globally to frame new rules on conduct, transparency and liquidity. One of the benefits was that banks no longer lived globally but then died locally – dumping the costs of failure on individual markets. By and large, that system has worked till now.
But 2017 may be the year in which that global regulatory consensus cracks under the weight of these social and political pressures. The most obvious example is the potential repeal of parts of the Dodd-Frank Act – the main US leg of today’s global regulatory consensus – by incoming President Trump.
Suddenly regulatory arbitrage is back on the scene and that is bound to add more complexity to any bank’s Brexit strategy.
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