Making the system resilient in a new age of financial services

December 2019

We are ten years out and it’s not entirely clear to me that people learned the lessons they needed to the last time. Have we really done all that we need to do to understand the risks we are taking on? Have we done enough in the non-financial risk area to understand whether we are going to be resilient going forward?

These questions posed by a participant in the 2019 Financial Services Leadership Summit were central to the discussions on the 16th and 17th of October in Washington, DC. Participants from the Bank and Insurance Governance Leadership Networks – directors, executives, regulators, and other subject matter experts – met to discuss how to make the financial system resilient to a range of evolving risks. More than ten years after the global crisis, the financial services business has changed, as have the risks of greatest concern to regulators, supervisors, directors, and executives. Large institutions have shored up capital and liquidity, new rules have been implemented, and supervision has tightened. Participants generally say that the regulatory and risk management reforms imposed by regulators and voluntarily undertaken by institutions have been effective.

However, in a shifting environment, new risks are moving up the agenda: operational and technical resilience are increasingly in focus, as are questions about the sustainability of business models and the system’s resilience in the face of forces such as climate change and geopolitical volatility. At the Summit, participants discussed the nature of these risks and how they can effectively understand and anticipate the second- and third- order effects to their firms and the system. Keeping up with the pace of change and the complexity of risks in a changing financial services ecosystem will continue to challenge financial institution leaders and their regulators. And pressure on earnings from new sources of competition and a global economic slowdown will challenge risk management and governance.

This ViewPoints is organized into the following sections:

  • The post-crisis regulatory regime may soon be tested

  • Cyber and technology risks threaten systemic resilience

  • Traditional business models face new sources of disruption

  • Building sustainable, responsible financial institutions

  • Risk governance adapts to a changing risk landscape