RegTech Intelligence

RegRoundup 18 January: Who, or what, do we need to be watching out for?

Over the last week, regulators have been signalling that they will not be tolerating risky or illegal finance in 2016 any more than in the previous year.  Margin requirements are back on the table, along with bankers’ remuneration and fines – plenty of fines.  Despite this, the inquiry into the UK FCA’s scrapped banking review continues, and China’s regulators are still struggling in the face of sorting out the current economic crisis.

This brings into the fore the issue of external risk, a potentially prominent topic of the coming year.  It has come to the attention of regulators now that, in a global economy, the resilience of a domestic financial sector may simply not be enough.  Aside from this, risks may not be stemming just from the economy, but from the climate.  As the world’s leaders converge on Davos this week for the World Economic Forum, it is tipped that climate change will be considered the biggest economic risk the world now faces.


Pressure is mounting again for clarity over the MiFID II delay, especially as the window of implementation is continually closing.  Should there be no delay (currently unlikely, but still to be wary of), then the lack of certainty emanating from the EU authorities is not helping firms in their preparation.  Indeed, while most larger firms are reported to still be getting ready, smaller firms have already started to fall behind in light of the potential delay.

On the topic of to delay or not to delay, Insurance Europe has called for an extension to PRIIPs, citing an unrealistically short period for preparing the Key Information Documents (KIDs) that are to be provided to customers under the regulation.  Perhaps this may be seen as a good time to be requesting regulatory pushbacks.

Finally, margin requirements are back on the Fed’s to-do list – an age old rule that will bring concerned faces to many in the US financial sector, as they plan not only to increase margin requirements but also to expand their scope.  There will clearly be no shortage in the crackdown on risky behaviour in 2016.


Last week we saw plenty of regulatory predictions for the coming year.  Frequently occurring guesses include a move towards supervision and implementation after the storm of regulatory releases last year, a switch in spending from capital to IT and compliance (including plenty of talk about fintech), and increases in capital with further progress on Basel reforms.

In terms of what has actually happened, the proposed tougher rules on remuneration buyouts from the Bank of England have stirred up conversation, and the Financial Stability Board (FSB) have released a consultation paper regarding the resolution plans for systemically important insurers.


It did seem to be widely agreed upon at the start of the year that capital requirements were up to scratch.  Naturally then, the risk monitors are turning to new horizons – and China comes up almost every time.  Indeed, while many countries speak of their robust stability rules having brought the financial sector back to normal, there are now warnings of how external risk can turn domestic stability completely on its head.  While the Fed raising rates may seem like the beginnings of a safer epoch, there is unfortunately plentiful to still be looking out for.  Attention is now turning to why China has got into the state it is in and how it can get out of it.

Of course, it is impractical to assume that Chinese volatility is the only current threat to the financial sector.  An interesting newcomer may enter the fray if we listen to the increasing talk of catastrophe risk resulting from more frequent extreme weather events and climate change.  This has seen companies and real estate firms ramping up their risk models and increasing investor demands for non-financial risk disclosure of the assets they are investing in.

In response to this, it might be wise to observe the new market risk framework that was, this week, endorsed by the Basel Committee on Banking Supervision, even if it doesn’t come into force until 2019.

Financial crime

We’ve now seen a bit more explanation from the FCA regarding their recent actions over the dropped banking culture review, partly in response to a Freedom of Information request.  But we’ve also seen a bit more controversy, as stipulations over the Bank of England’s involvement in the decision increase and an independent review of the FCA warns of their lack of independence from government.

Fines and sanctions have kept their accelerating pace in the new year, as the PRA fined and banned the former Co-operative Bank managers involved in the risk management failings that came to light several years ago.  And Goldman Sachs has settled for a whopping $5.1 billion with the US for its handling of mortgage-backed securities and their role in the financial crisis.

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