Financial Services
Financial regulatory reform
In the wake of the financial crisis, policymakers and regulators have embarked on changes in global financial regulation on a scale not seen in decades as they aim to improve the safety and soundness of the financial system.
Finance is entering a new age of re-regulation that presents a core challenge for bank governance: figuring out how business models will need to change in response. Changes include new and changing regulatory structures, increasing focus on macroprudential risk, new capital, liquidity and leverage requirements, increasingly intensive and intrusive microprudential supervision, and increasing consumer protection regulations.
Local regulators are focused on avoiding the need for government bailouts of systemically important financial institutions, resulting in increased attention on local entity governance, ring-fencing of capital and operations, and subsidiarization. New regulatory bodies are being formed and international regulators are increasing coordination. Still, individual countries are moving at different paces and may enact different standards, resulting in an unlevel playing field.
Bank boards must understand the implications of emerging regulatory changes and help management get ahead of them as they consider emerging strategic risks and opportunities.
A sustained dialogue among executives, independent directors, and regulators can help identify the right balance between the need for safety and the need for a robust financial system that is free to take risk to support economic growth, so long as it is prudently managed and supervised.
Explore this issue:
