Wealth 2020 effects of regulatory reform on competition in the banking industry

2018 Outlook: Global Perspectives on the 2-Years Ahead Plan

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2018 Outlook: Global Perspectives on the 2-Years Ahead Plan

Looking ahead to 2018, will the global growth trajectory continue and help support market fundamentals? If you missed 2017 methodic preparations and precautions, the replay is now available through all this year.

As the recent example, the OECD released Additional Guidance on the Attribution of Profits to a Permanent Establishment under BEPS Action 7. The new extra regulation contains extra attention on the attribution of profits to permanent establishments. Those 2018 approach resulting from the changes in the Report on BEPS Action 7 to Article 5 of the OECD Model Tax Convention, originated by the OECD/G20 as part of the final BEPS package in October 2015. 

In 2020 regulatory reform effects also on the competition in the banking industry, as 2018 presents an opportunity to modernize regulatory compliance and pull together disparate defences for individual compliance goals.

A new regulatory banking experience - shrink into a competition?

After a decade of intense scrutiny by regulators globally, banks seem to be sensing some stabilization. At least in the United States, new rulemaking appears to have abated. There are also signs of divergence among national regulators, who, after a period of unprecedented coordination following the financial crisis, appear to be pursuing paths suited to regional and national priorities.

For example, many global firms are dealing with varying local market needs and regulatory mandates, and more recently, with differing views on key prudential regulations, such as the still-pending aspects of the Basel III regime.

But expectations of a broad regulatory pullback could be misplaced. Some U.S. regulations are being reviewed and may be amended, such as the Volcker Rule,6 regulations around governance expectations of bank boards, and the size threshold for systemically important institutions. However, higher capital and liquidity requirements, stress testing, and recovery and resolution planning will likely remain intact.

Compliance expectations, especially around the fair treatment of customers and executive accountability, are expected to stay elevated. Regulators are also expected to maintain vigilant enforcement programs and to demand more data from banks to test the operational integrity of complex institutions, particularly when under stress.

In Europe, the Markets in Financial Instruments Directive II regime and proposed EU rules to establish intermediate holding companies, assumably similar to those required under U.S. regulation, should continue to be significant priorities for global banks.

Additionally, the second Payments Service Directive (PSD2) regime could have spillover effects across geographies. Data protection rules, especially the General Data Protection Regulation, should further add to the compliance burdens.

A new custom portfolio management experience - effect from the competition

So how can banks operationally achieve this modernization? Consider integrating regulatory compliance goals - from the standpoint of ownership and accountability, with strategic initiatives such as growth, operational simplification, risk management, and cost efficiency.

Simply put, regulatory compliance should be aligned with business strategy. Not doing so could put banks at risk of unmet regulatory expectations and subpar performance.

Regulatory compliance should also figure prominently in the change of client's custom portfolios that banks need to make and manage, nevertheless at both the individual business and enterprise level, moreover, this change requires to consistently apply a standard of due care in managing businesses.

In reality, clients increasingly want custom portfolios that reflect their sensitivity, meet their aspirations, and that is also capable of responding to market conditions in virtually real time. The technology and portfolio management techniques used allow precise adjustments to be made to investments more quickly in line with the markets and clients’ individual circumstances.


Wealth Structuring | GP GR | Block Funding | EME | Residence | Retirement Plans in the OECS from EMEA and Russia.

We are an EMEAC independent consulting firm, committedly neutral and impartial with no political, partisan or national interests and, with the explicit intention of creating open and equal dialogue between allies.

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