New frontiers in financial regulations

New frontiers in financial regulations

Portrait of Knut Storholm
Senior Partner
Dubai Office, Mittlerer Osten
+971 4 446-4080
Central issues (not only) for central banks

Welcome to the new financial reality

Complex times call for sophisticated action plans. Changes to European payment regulations raise a vast number of intricate questions, requiring finesse to navigate their complexity . At the same time, emerging FinTech innovators are vying for attention through the capture of traditional value chains and customer interfaces.

Banking regulations and stringent regulatory constraints present a challenge for the organizational setup of banks, as well as their products and services, in parallel to increasing regulations. Welcome to the new financial reality - two sides of the same coin.

What to expect here:

Payment Services Directive 2

European banks face a shake-up

Since the turn of the millennium, substantial innovations in the way payments are made have had a monumental impact on the industry. Soon, the EU Payment Services Directive 2 (PSD2), coming into force in mid-January 2018, will open up the payments market and allow access to accounts to new and increased competition, not only from nonbanks, but from smaller, emerging banks as well.

In a nutshell, 25 to 40 percent of net banking income is at stake. Are you ready for this strategic and technological challenge? Our latest in-depth analysis, "Successfully Navigating Changes to Payments Regulations", is an extensive guide to the opportunities that lie ahead for incumbent market participants, as well as emerging players.

Digitalization

Minting a central bank digital currency

2017 is heralded as the dawn of digital currencies in the financial services industry and beyond. Amid all the hype, it is important to sift through and identify the key messages relevant in the world of finance. In order for central banks to maintain relevancy into the future, central banks are tasked with evaluating the development of a central bank digital currency. We provide a clear, five step roadmap, from first vision to the national rollout.

Making sense of ongoing developments in a VUCA world, especially in the context of pervasive new technologies, is challenging. The speed and perceived relevance of emerging technologies, such as cryptocurrencies just adds to the mix – catapulting central banks into unchartered territory.

While a central bank digital currency will not completely replace physical notes and coins any time soon, there can be no doubt these digital technologies are here to stay.

The rise of cryptocurrency
Re-thinking structure

Central banks under the microscope

The paradigm of central banking is changing, creating organizational and transactional challenges. As a new digital dawn shines ever brighter, we analyze how central banks can maintain relevancy into the future.

In "New realities in central banking: The organizational challenge", we examine structural changes, organizational levers and the transformation necessary for central banks to become high performance organizations. Our analysis proves there is room for improvement. Bank-wide organizational transformation projects can lead to cost efficiencies of almost 20%, and high functioning central banks are able to operate optimally with only one third support staff.

Successful transformation requires robust top management ownership, coupled with strategic program management and continuous effort to drive cultural change among employees, management and key stakeholders.

"Basel IV"

A tale of credit risks and capital floors

So, you're not a central bank, a Chief Regulatory Affairs Office, and you're not involved in the payment industry. But you are a bank - or a corporate entity reliant on global finance. What else is on the horizon that could affect your business long-term?

Eurozone economies are proving fairly resilient post-Brexit so far, but implications, such as a potential drop in foreign investments are still uncertain and will take time to materialize. Our technical exploration in the "Implications of ongoing Basel IV debates" maps the repercussions of the proposed new standard, notably on right-weighted assets (RWA), then on capital reserves. Our analysis includes a wide range of potential effects on EU versus US Global Systemically Important Banks (G-SIBs) and jurisdictions. Banks, particularly in Europe, are tasked with reviewing their size and/or balance sheet structure.

We promised to leave digitalization aside, if only for a moment. Well, that moment has passed. We trust we have prepared you for the striking regulation issues coming up. It pays to take some time to prepare for the digital future of financial services. Mind you, it touches upon regulation too.

Portrait of Knut Storholm
Senior Partner
Dubai Office, Mittlerer Osten
+971 4 446-4080
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