Although much of the recent regulatory attention has been on prudential issues, increasingly focus is now also falling on consumer protection – as regulators seek to help customers make informed investment decisions and to buy investment products that best suit their needs.
With this in mind, the G20 has endorsed a Financial Standards Board report on consumer finance protection and also appears committed to the OECD’s consumer protection principles.
Consumer finance has emerged as a key focus of consumer protection in the US, where the Dodd-Frank Act has created the Consumer Financial Protection Bureau (among other measures) in order to enhance consumer protection and mortgage reform. As new issues emerge, additional rules seem likely to come into force.
In Europe, a host of regulatory initiatives – including the Markets in Financial Instruments Directive 2 (MiFID2), packaged retail investment products and the Retail Distribution Review – have been implemented to protect banks’ customers.
However, in Asia (particularly in Hong Kong and Singapore), the focus is very much on retail investment rather than banking products – largely as a result of the ‘Lehmans mini-bond’ debacle.
An opportunity for banks?
For banks, the data, systems and process implications of these regulations are substantial and onerous.
Nevertheless, it’s worth noting that with banks across the world fighting to retain and attract customers at branch level, optimize rather than reduce associated costs and to improve their sales and their overall customer service experience, these regulatory developments may offer opportunities to gain valuable commercial insight – insight that could lead to increased revenue.
Regulators are also currently determined to ensure investors comply with the relevant tax authorities – and to use tax as a means of paying for some of the costs of the global financial crisis.
To this end, there has been a lot of activity in traded markets regulations – even if slower and less globally consistent than was promised.
Specifically, the Dodd-Frank Act in the US and the MiFID2 and EMIR legislation and other regulations in Europe will all impact the structure of the traded markets – in particular how derivatives are cleared, settled and reported.
To a considerable extent this is a global issue, as evidenced by similar discussions over centralized clearing of over the counter (OTC) derivatives coming out of major Asian markets such as Australia and Hong Kong.