Keep the financial regulators happy with cloud collaboration
Join the DZone community and get the full member experience.Join For Free
Financial regulation in the US and UK has come some way since the nineties, with Brown and his “light touch” regulatory approach and Greenspan’s perennial “zero” interest rate paradigm. In 2007 when money markets dried up (causing the sub-prime collapse), to say Main Street was irked would be an understatement. Bankers seemed to have taken the brunt of it as far as the blame game went. As a result, governments were forced to respond to a global outcry for tighter banking regulation.
Are acronyms the answer?
The UK’s former financial regulators, FSA, was dismantled in spring 2013. In its place now are two regulatory bodies: the Prudential Regulation Authority (PRA) who ensures stability of financial services (supposedly) and the Financial Conduct Authority (FCA) who is the City’s behavioural watchdog. Bank of England (BoE) has also taken direct supervision over the whole of the banking system through its Financial Policy Committee (FPC). There’s no better way to overhaul the entire banking system than by creating a brand new list of acronyms.
Slight cynicism aside, whether or not the new regulations will “clean up” the business of banking is yet to be seen. But one thing’s for sure – it’s all gone political which means agendas are high on the agenda. The new regulatory cats will be keen to prove their worth, and as a result there’ll be plenty of jobsworths knocking down banks’ doors asking them what the hell they’re up to. The public need to see that banks are being kept on a short leash, and the regulators will be the ones to show them (well, show them that they’re trying, at least).
Financial firms need to keep their houses in order, or suffer the wrath of “the man” with something to prove. For example, the FCA has launched an initiative called Enhanced Supervision (which seems like it’s just an imaginative renaming of the former FSA’s Close Supervision scheme). This new approach is similar to a method used by the Office of the Comptroller in the US and will be deployed when there are “serious failures of culture, governance or standards” (FCA June 2014).
Like the above statement, the criteria for applying Enhanced Supervision is somewhat vague. The FCA will mostly have a discretionary approach, but guidance has suggested hypothetical “serious failings” or “red-flags” which could trigger this kind of oversight. In some ways this is worse than a very stringent set of criteria to abide by, because financial firms may not know how to comply with standards or need to cover every base just to be sure they’re compliant.
If that wasn’t tricky enough…
At the end of July 2014, BoE in response to the recent LIBOR scandals past outlined a tough new regulatory regime which suggested that bonuses could be withheld for a longer period of time and a “guilty until proven innocent” approach could be taken against alleged offenders. It’s been prophesied by EY’s UK head of banking and capital markets, Omar Ali, that “the regime is likely to be the strictest of any market or any industry. As personal risk for directors increases and rewards are increasingly scrutinised, senior bankers will need to decide whether they are willing to take on this level of personal risk”.
Given all that, it’s safe to say that if you’re playing the finance game, the regulatory spotlight is quite possibly on you and it’s worth battening down the hatches. So, from a technological standpoint, what can you do to help yourself avoid the audits, fines and more importantly – reputational risk?
Two words: enterprise collaboration.
Without going into a laundry list of the things enterprise collaboration technology can do to help you stay on the regulators’ good side, it’s worth simply stating that it will offer some great business solutions. Things like seamless partnerships in a unified online space, a host of cutting-edge communication functionality, and powerful data storage, analysis and audit tools. Add it all up and it’s the equivalent of a regulatory fly swat.In case you did want a laundry list of the things this piece of kit can do, take a look at our page on regulatory reviews. If the contents of this article affect you in any way and you need someone to talk to, why not contact us or request a demo to see how HighQ’s range of transaction management solutions can help you keep the regulators happy.
Opinions expressed by DZone contributors are their own.