The regulatory agenda – and the burden of strategic and operational change it is putting on banks – continues to advance apace.
At the top of the house, UK banks are busy crafting Recovery and Resolution Plans (RRPs) to help authorities manage their demise if they ever again run in to trouble – while at the same time anticipating the re-shaping which will emerge from the Government’s final requirements on the structural change suggested by the Independent Commission on Banking.
Wholesale divisions are racing to prepare for the overhaul of the derivatives market – determining their strategy in a re-shaped market, upgrading technology, preparing for reporting, and re-appraising approaches to collateral.
Retail banks are re-focussing on engagement with customers – in response to both supervisory and market pressures – as they seek to build deposits and look for opportunities to boost returns.
Finally, across the business banks are working to embed the impacts of new capital requirements on existing markets, products and customers. Each on its own would be a major change programme – in combination, they are fundamentally re-shaping banks.
Meanwhile, as part of their day-to-day business, regulators are bearing down on areas where banks show consistent shortcomings. Under particular scrutiny are deficiencies surrounding protection of customer assets and regulatory and trade reporting, issues that have come to the fore once again following MF Global’s collapse.
In many cases, the root cause of banks’ regulatory failings can be traced back to poor governance. These failures manifest in many ways: a lack of clarity over processes and accountabilities, poor information to accountable officers (fed by poor data) and ineffective operation of necessary controls. The worry is that, given the fast-developing regulatory agenda, the problem is set to get worse.
In the rush to implement new processes and systems in response to regulation, too often the surrounding governance and control frameworks receive insufficient attention, which is precisely where regulators will focus to ensure banks have embedded the appropriate design and assurance into the changes made.
Therefore, taking the time and effort to achieve clarity over your new processes as they take shape, and assure yourself that there is the necessary governance and control framework to manage them effectively, will pay dividends going forward.