The UK financial services (FS) sector’s infrastructure is “chronically unprepared” to deal with the regulatory changes that will result from the country leaving the European Union (EU), claims the FS management and technology consultancy Brickendon.
The firm says that compliance and regulatory costs have increased dramatically since the 2008 financial crisis, in an effort to avoid what can be multibillion-dollar fines – in some cases resulting in an additional US$4bn expenditure each year according to a recent Financial Times report.
With the regulatory burden still increasing – the Fundamental Review of the Trading Book (FRTB) is expected to increase costs by a further 200% to 400% on its implementation in 2019 – systemic modernisation of internal systems is required if these costs are to be managed effectively.
This has led to a paradigm shift within the internal-decision making process of financial institutions, as ensuring compliance takes precedence over pursuing fundamental business objectives such as revenue growth and operational efficiency gains.
With focus distracted from business development strategy, UK financial institutions are under-performing in relation to international competitors. The consequences of this have already taken affect: annual profits at the UK’s five largest banks last year were 63% lower than in 2007, whereas US competitors reached pre-crisis profit levels as early as 2010.
“As the UK takes its first steps into an uncertain future, one thing we can be sure of is that effective management of compliance costs will be essential to the future success of our financial sector – and significant efficiency gains can be made through the modernisation and optimisation of internal business and IT eco-systems”, says Chris Burke, chief executive officer (CEO) of Brickendon Consulting.
“The extensive use of outdated IT systems within the financial services sector is seriously impairing banks’ ability to adapt to regulatory change – resulting in an unnecessary level of resources being sunk into compliancy costs, and limited ability to react quickly to changing market conditions.
“By replacing inefficient IT architecture and introducing systems better-designed to handle a constantly evolving regulatory landscape, the financial services can reduce operational costs and re-attribute resources to developing long-term growth strategies.”
The firm notes that the compliance burden is a new reality for the financial services sector, and if operating costs are to be kept at internationally competitive levels, a more focussed approach to managing the cost of compliance is required immediately.
The US money market fund reforms came into effect in 2016 and are already dramatically shaping US fund industry with investors flooding out of prime funds and into government securities. While the reforms are similar, they are not the same. GTNews interviews Yeng Bulter, global head of the cash business at State Street Global Advisors on the differences.
Far and away, the largest financial market on the planet is the foreign exchange currencies market, where on average individuals and organisations trade more than $5 trillion daily. In the FX world, the ability to master the market isn't considered a luxury for treasury officers–it's a necessity.
As the May 25 deadline for Europe’s General Data Protection Regulation (GDPR) inches closer, many treasurers are being lumped with the task of ensuring their wider company is compliant.
APIs may be a solution to MT940 challenges, says Karen Fagan, treasury operation manager, for British television company, ITV.