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Achieving the required transparency for regulatory reform in banking

[fa icon="calendar"] 20-Dec-2016 09:24:50 / by Alex Vaksman

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In today’s banking industry many organisations are finding it increasingly challenging to meet the transparency requirements imposed on them. It arguably feels like a fusillade of bullets coming from all sides. Central banks, regulators, internal requirements, auditors, and others, are all imposing their own compliance and risk practices, to which banks must adhere or face the consequences and potentially pay a hefty price in regulatory fines.

Banks have attempted to correct this issue by throwing large amounts of money at the problem through the hiring of expertise, technology, consulting and other means. Yet it is still a struggle to achieve the required level of transparency which has been deemed essential by the regulatory experts following on from the G20 accord at Pittsburgh.

Now the first question that comes to mind is: How can one meet these extensive requirements and can money sort all my problems?  Unfortunately, the answer here is not so straight forward.

People and technologies often fail to meet the ever changing requirements, as they become even more complex. Whether it is the looming MiFID II deadline or the recent regulatory need for IFRS9, which replaces the already notorious and ever evolving IAS39, banks of all sizes struggle to keep up. Some of these banks may struggle due to a lack of internal expertise, thus attempting to fix this problem with expensive automation and cumbersome processes, whilst others throw man power at the problem, thinking that employing 40 people to solve the same problem will be the solution.

As obvious as it may seem, banks often fail to find the perfect balance between expertise and technology, and thus tend to over invest in one or the other. Many fail to understand that both are needed to achieve the best possible result.

Banks most importantly need access to the right level of expertise in order to achieve their ultimate goal, which is to silence the consistent diktats of the regulator and focus on their core business. These experts must not only know the theory, which we often find in large consulting houses, but also how to find a framework or methodology and also have practical experience of being able to apply this methodology. Such an elusive blend is often challenging to find but may be worth its weight in gold.

With the right expertise, banks will be able to select and exploit the right systems which will meet the needs of the regulator without the need for dozens of employees and at the same time meet the compliance standards required. This will enable the bank to put the right processes in place in order to achieve these cumbersome requirements and in the long run save the bank money. Implementing a system based on best practices and with operational experience built in can be a far more efficient use of resources than increasing headcount.

To conclude, there is no one golden rule on how to solve the issue of regulatory transparency, but finding the right methodological and practical expertise will be the first step to overcoming this hurdle, thus don’t be parted from your money for the sake of big brands, it is the individuals with the unique combination of theory and practical experience which will be your first step in the right direction. Try looking beyond the blinding lights of big brands and find the people which meet your needs and your unique challenges

Topics: Banking, Regulation, FX, MiFID II

Alex Vaksman

Written by Alex Vaksman