Financial regulation has done little or nothing to improve stability in the financial services market, claim senior financial services professionals polled by valuation and corporate finance advisor Duff & Phelps.
The firm commissioned a survey of nearly 200 professionals, which found that 35% of respondents believe recent regulation has had little or no impact on financial stability, with 17% stating that regulation has actually made the financial services world less stable.
Kinetic Partners, now the compliance and regulatory consulting division of Duff & Phelps, has published the Global Regulatory Outlook report since 2012. Its fifth edition finds that, a decade on from the financial crisis of 2007-08, only 10% of senior executives surveyed say they believe changes to regulation have fully addressed the risk of a future crash.
Fifty-five percent of respondents agree that the risk has been partly addressed by new regulations, but 33% don’t believe the regulatory framework has adequately created safeguards to prevent a future crisis. “With president Trump committed to reviewing Dodd-Frank and the future regulatory framework of the London market uncertain due to Brexit, financial regulation may be about shift once more for banks and fund managers,” the report suggests.
Commenting on the findings, Julian Korek, global head of compliance and regulatory consulting at Duff & Phelps, said: “More needs to be done to build stability in financial services and ensure the system is resilient in future, for both banks and the alternative investment industry.
“Even now, a decade on, most people in the financial services sector are not confident that the risks that caused the crisis have really been managed. The major regulatory bodies have been very clear about future areas of focus and concern, but the fact that so many still think there is potential for another crash is worrying – even without Trump or Brexit potentially taking the market down a quite different regulatory path.”
Despite these challenges, the survey revealed that the industry believes financial regulation is having a positive effect on the investment community – 42% believe financial regulations have helped cement investor confidence and only 6% think their effect has been negative.
However, only 23% of the executives surveyed believe that regulators have created effective global regulatory frameworks, although 57% do believe that regulators are better at collaborating and coordinating across borders.
Effective cross-broader collaboration will be essential for fund managers in particular post-Brexit, especially for those based in non-European Union (EU) jurisdictions looking to be assessed as equivalent under the Alternative Investment Fund Managers Directive (AIFMD).
The European Commission (EC) is currently reviewing recommendations issued by the European Securities and Markets Authority (ESMA) on the application of the Alternative Investment Fund Managers Directive (AIFMD) marketing passport for non-EU markets, meaning the future of the financial passport is still unclear.
As such, the 2017 Global Regulatory Outlook report shows that 62% of firms agree Brexit will have an impact on their compliance arrangements, though it is unclear whether this will be felt in the short or long term. Just over a third (35%) believe that Brexit will have a short-term impact on compliance arrangements, while 27% expect the impact to be felt in over 18 months.
“Recent political turmoil coupled with scepticism regarding the efficacy of financial regulations means uncertainty reigns in most financial compliance departments today,” said Korek. “Although the UK is expected to be in a good position in terms of third country equivalence, firms are looking for further stability from regulators. Fund managers and bankers clearly lack confidence in the current regulatory regime, which may provide a level of support for those governments seeking to make significant changes.
“That said, regulators have gone some way to help rebuild trust in financial services. Firms therefore have an important role when it comes to maintaining investor confidence in the sector and ensuring transparency is evident in all their operations and governance going forwards.”
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.
APIs may be a solution to MT940 challenges, says Karen Fagan, treasury operation manager, for British television company, ITV.
Using data for predictive analytics is the future of banking success, argued Jean-Laurent Bonnafé, CEO of BNP Paribas, in his session on how the bank is reinventing its approach to innovate with and for corporates.
The EU and US’ shift in accounting standards may bring balance sheet losses and increase credit risk, according to James Elder, director of risk services at Standard & Poor’s (S&P) Global.