The year 2023 marked the first failure of a globally systematic important Financial institution (G-SIB) post the financial crisis 2008. This was preceded and succeeded by the collapse of other US Financial institutions. Coupled with the geopolitical tensions due to Russia’s invasion of Ukraine and a newer global monetary policy path, the global financial system landscape has completely changed.
Against this backdrop, regulators have faced heightened risk to the financial market stability and a loss of confidence in the banking system and have taken measures to restore this confidence.
We have observed regulators globally re-examine the focus and scope of risk management as a first measure to restore this confidence back
While the regulatory reporting requirements will increase, the regulatory supervision is also expected to become more intense with heightened supervisory expectations.
Given the complex operating models of Financial institutions, every regulatory requirement today necessitates technological interventions and impacts a high number of different processes within the Financial institution as well as affecting both business and operations.
It is therefore critical for Financial institutions to move away from a reactionary tactical approach to a more proactive & strategic collaborative approach to address regulatory challenges and technology adoptions.
Aside from the legacy systems and reactionary approach, the traditional model and mindset are also an impediment. There is usually a disconnect between the compliance department and the business teams, technology, operations, and risk teams. The interpretation and finer details of a new regulation are left with the legal and compliance teams and then trickled down on a case-by-case basis.
We are also seeing implementation timelines come down, and hence, it is essential as a first step for the leadership teams in the Financial institution to assess future compliance readiness through
The leadership across various enabling teams representing the CIO, CRO, CFO, CCO, the business lines, and the Head of regulatory change need to come together to enable the Financial institution to establish an effective regulatory change and reporting infrastructure.
A clear operating model with the right culture and right incentives, empowering data architecture, standardized processes, streamlined digital workflow, and application of regtech technologies are all important components of the infrastructure.
Co-authored by Deepak Bhatter, and Venkatesh Padmanabhachari
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