Banks must re-examine their risk appetites in light of global regulatory shifts
Ronald Gould, former senior advisor to FSA UK, feels that banks now face a far more complex operational environment where the costs of getting it wrong have risen dramatically. January 08, 2013 | Ronald GouldThere are concerns about extra-territorial laws that many in the banking industry face in a growing number of areas and in a variety of different ways. There is nothing new about this—powerful countries have often imposed their will on others by arbitrarily extending the application of their laws to different jurisdictions. The financial crisis exposed the areas in which risk had been allowed to build to unacceptable levels. As a result, post-crisis efforts have been directed toward fixing these flaws. The G-20 countries have agreed to arrangements that allow financial risk to be managed and controlled more effectively and at less risk to public finances by setting out new guidelines for financial system management and regulation. The advent of bank living wills, the concept of Global Systemically Important Financial Institutions (G-SIFIs), special resolution regimes for systemically important firms and many other new rules have all been designed to prevent future meltdowns and improve the way risk is managed in the financial system. The US Dodd-Frank Act is the ultimate manifestation of these efforts but the European Market Infrastructure Regulation (EMIR) and Markets in Financial Instruments Directive II (MiIFID II) in Europe were born from similar circumstances. They share a common tendency to cut across borders because key players in their financial systems are themselves so global. It is not surprising that governments are concerned about the ability to control the transmission of risk from one place to another when you consider the costs imposed on national finances by a failure in a major financial institution. Financial institutions everywhere now face a far more complex operational environment where the costs of getting it wrong have risen dramatically. And those costs are not merely financial but reputational as well. Problems with regulators in one jurisdiction are now often the signal for regulators in other places to have a clo... Please login to read the complete article. If you already have an account, you can login now or subscribe/register.
Categories: Capital & Strategic Issues, Regulation, Risk and RegulationCapital & Strategic Issues,riskregulation,Risk and Regulation, Capital & Strategic Issues,Regulation,Risk and Regulation, Keywords:Ronald Gould, G-SIFI, Dodd-Frank Act, EMIR, MiIFID II Ronald Gould, G-SIFI, Dodd-Frank Act, EMIR, MiIFID II
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