In today’s investment environment, sustainability objectives are regarded as highly as other important goals. European Union regulators recently implemented the Sustainable Finance Disclosure Regulation, which seeks to ensure that financial firms are honest about how sustainable their products and services are. What are the key steps financial institutions should be taking to ensure that their disclosure reporting aligns with regulatory requirements while anticipating the new demands on their capital providers?
European Banking Authority
Today, cloud computing is not only critical to the future success of the European financial sector. It also sits at the heart of the continent’s COVID-19 economic recovery plan. However, due to concerns relating to regional independence and operational resilience, the European Commission (EC) is wary of financial institutions central to Europe’s success becoming too dependent on individual cloud providers.
COVID-19 has brought the centrality of the banking industry within the financial sector into sharper focus. Banks’ roles in shepherding their economies through the troubling times of the pandemic and beyond are indisputable; how well they fulfil their mandates will determine the success of the broader recovery in Europe and elsewhere. The road won’t be easy, and the banking sector needs to redefine and restructure itself to meet these challenges. Bank boards will have to take a more prominent role in this process.
Some puzzles are fun, while others are not. The sovereign-bank diabolic loop puzzle is definitely not fun for the European governments and banks victimized by it. Trapped in the loop, banks hurt sovereigns, while sovereigns return the favor by hurting banks. Is there a way to break free of this deadly embrace? New research shines a light on a possible channel to freedom that strangely enough originates in the US.
Europe’s banks deserve a lot of credit for weathering less than ideal conditions, such as ultra-low interest rates and profitability in conjunction with high levels of fintech competition and toxic debt. But while conditions haven’t improved much lately on the interest-rate side, the bad-debt situation is considerably brighter. Astute regulators and governments deserve much of the credit, but so do the banks themselves for revamping their management of nonperforming loans.
The European Union has put up a brave front against financial crimes such as money laundering, but the criminals still manage to get away with a way too much ill-gotten gain. Progress is being made with the new AMLD5 framework, but much more needs to be done to achieve resounding success. What are some of the steps the EU should take to finally grab this brazen bull by its horns?
Diversity and inclusion have recently become top goals in the strategic policies of many banks, but how is execution matching up? Research continues to expose large gaps between good intentions on paper and good outcomes in practice. Diversity and inclusion are more than nice-sounding words; when realized, they boost profitability. Banks that go no further than prioritising these goals in mission statements miss out on playing the ace.
Why do we need stress tests? Since the financial crisis, stress tests have become the main instrument of bank supervision. In stress tests, supervision interacts with regulation and bank capital requirements. Research highlights the role of stress-test supervision in dampening the incentives of banks to take risks, especially when capital requirements are not effective.
The Great Recession produced a number of aftershocks, including a tidal wave of regulations (with the?) intent on preventing the same event from ever happening again. A mismatch between increasingly complex and detailed international standards and ever more uneven implementation by national authorities ensued. Consistent, harmonized adoption of financial standards by all involved is necessary to ensure smooth global processes. Some suggestions are presented in this article.
For banks, cloud computing appears to be the perfect answer to the growth of big data—and the necessity to manage and exploit it. This shared pool of information offers increased efficiency at lower cost, but adoption can be challenging for banks, with regulators expressing concerns especially regarding customer data protection. Fortunately, success is within reach through effective collaboration between banks, regulators and cloud providers.