05/01/2010
By Matt Ritchie
Adapting to new regulatory requirements will be a key task for the financial services industry in the year ahead, according to global professional services firm PwC.
Bankers identified regulation as their third biggest industry concern in the Banking Banana Skins survey and report published at the beginning of last year by the Centre for the Study of Financial Innovation and PwC, and PwC’s global financial services leader Nigel Vooght said chief executives feel that last year’s worries will become ‘painfully tangible’ this year.
In addition to new banking regulations, other regulatory changes PwC points to include the impact of Solvency II on insurers, and investment managers’ work towards designing a solution to the new Alternative Investment Fund Managers Directive that will fit with US financial reform, the updated Undertakings for Collective Investment in Transferable Securities, and the Foreign Account Tax Compliance Act.
In the UK, the Independent Commission on Banking is considering structural reforms to the banking sector, and is due to report back to the government by the end of September.
“There is definitely more pressure and change to come, particularly when pending regulation hits,” Vooght said.
The International Accounting Standards Board is expected to change the way insurance contracts are accounted for around the middle of the year, in a move which PwC said will have significant systems, operational and accounting impacts. The impact of the changes is expected to be most keenly felt by life insurers.
PwC also notes that the trend of a shift in the geographic concentration of private equity and hedge funds is spilling over into other financial services industries.
Financial services centres in Asia are expected to swell into the future, fueled by the continuing inflow of public and private capital. Meanwhile, tighter regulation and higher taxes are identified as a push factor out of Europe and the US.
Further, strict remuneration regulations across the UK, Europe, and the US are expected to see some individual talent leaving the traditional financial services centres. However, traditional centres are expected to continue to attract top talent, with movement happening in ‘pockets’.
“Organisations will have to deal with new regulatory requirements while simultaneously proving they can be socially useful, transparent, deal with limited resources, compete in emerging markets and so on. And while reputation and compliance issues currently seem more urgent, developing sustainable strategies to deal with big picture trends like ageing populations, technological advances and changing customer profiles will soon be just as pressing. The list of challenges set to disrupt ‘business as usual’ is seemingly endless – early identification of issues and scenario planning will become business critical this year,” Vooght said.
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