ARE FINANCIAL INSTITUTIONS YET TO EMERGE FROM THE POST-FINANCIAL CRISIS REGULATORY SOUP?
In the years since the financial crisis, the regulatory pressures placed on financial institutions have increased exponentially. A swathe of regulations, such as Solvency II, FATCA, Dodd-Frank, MiFID, Basel III, EU initiatives and T2S, have been introduced to attempt to address weaknesses in the global regulatory system.
However, these regulations have met with mixed success thus far. Many financial institutions have a long way to go before they can truly be said to have embraced the new, highly regulated environment in which they operate.
Given the muted response to global regulatory reform so far, it is unsurprising that opinions on the who, what, why, when and where of the global financial crisis are legion. Some blame the highly complex network of bodies overseeing different parts of the financial markets that failed to identify or respond to the macro trends that led to the crisis. Others have it that there was insufficient capital in the banking system to absorb the massive extent of the losses. In truth, the crisis had multiple causes.
What does seem beyond doubt is that there has been, and continues to be, weak links between macroeconomic policy makers in financial institutions on the one hand, and regulatory bodies on the other. What’s more, the steps taken by the G20 major economies, via the Financial Stability Board (FSB), have so far had little impact in addressing the pertinent issues.
And in the European Union, a lack of a central regulatory authority remains a particularly acute problem; for some, the financial crisis highlighted the need for the single financial market to have more central coordination of regulation.
Jul-Sep 2015 Issue
Fraser Tennant