For European banks, regulations (GDPR, MiFID II, PSD II, Open Banking) are aligning at a time when they are already warding off digital disruptors intent on wooing customers with convenient, cutting-edge technology-based offerings. Financial institutions that adopt a wait-and-see approach will likely lose ground in a rapidly changing financial landscape, but those who adapt and maximize their formidable advantages will prevail.
The last financial crisis demanded a response, and that response was regulation…and more regulation, to such an extent that financial institutions are scurrying to hire additional compliance staff to try to make sense of it all. Fortunately technology has come to the rescue once again by spawning regtech, which is evolving to better manage the formidable challenges created by regulatory change.
With the implementation of the Open Banking Standard, the United Kingdom embarked on a new era of openly accessible customer financial data, which should result in greatly improved products and services. If financial institutions work together to innovatively collect, analyse and share data, customers’ needs will be most efficiently satisfied; that is why Open Banking is not confined to the UK but is spreading worldwide.
Financial services firms face a range of headwinds. The last thing they need is a regulatory tornado blowing the house down due to data integrity and reporting errors.
The Markets in Financial Instruments Directive II (MiFID II)—a major package of financial reforms for European markets—is due to be introduced at the start of 2018. The new rules are aimed at providing considerably more protection for investors
The intensifying interconnectedness of countries around the world has its benefits but also leaves nations vulnerable to the potentially detrimental effects of not only financial meltdowns but also regulations imposed by foreign entities. The EU’s soon-to-come MiFID II is already causing consternation in the United States, especially as the new regulations relate to US investment firms.
The UK’s upcoming divorce from the EU will not come without costs, and no matter what the eventual scenario, those costs will be substantial and far-reaching, on both sides of the fence. UK banks already have a lot on their plates in the form of new-regulation compliance, but it is now or never to prepare for EU-27 inclusion after March 2019.
Financial institutions in the UK are waking up to the inevitability of Brexit, and thus they are beginning to budget for contingency plans, especially after the Bank of England requested that banks submit their plans for a hard exit. Planning ahead now is certainly prudent, as not doing so is guaranteed to leave banks struggling to cope with new regulations and changing market conditions.
Private bankers and wealth managers have been competing amongst themselves for years, attempting to outdo one another in terms of offering the best service for the lowest fee; but today relatively low-cost disruptors, robo-advisors, are snatching away too much of that business. The remedy is a three-point strategy that proves that the value of the service offered by traditional providers justifies the higher fee.