Increased focus on regulating banking and financial institutions is changing the way they do business. Today, the financial markets are more regulated than ever. In Europe we have the Basel regulatory capital-driven requirements and increased consumer protection and complex financial instrument restrictions outlined in MiFID II, EMIR and MiFIR.
While increased oversight is necessary to restore the trust in the sector, there is a fine line between restoring trust and strangling opportunity through high compliance costs, increased capital requirements and disproportionate penalties.
Of course, tighter regulation is designed to improve standards and provide better transparency from the financial services. An unintended consequence in the short to medium term might encourage senior talent away from the big banks, pushing them towards less regulated, smaller private equity and investment funds and finance houses. As a result, we might lose experience and expertise as they move into positions more risk-friendly environments.
An argument can be made that the big banks not only lose great talent, but senior executives and managers who are mostly likely the best placed to help maintain regulatory standards. This causes concern for the banks and, ultimately, the financial markets and investors.
In a city that employs 2 million people within finance and professional services industry, this has a real economic impact. The sector injects a gross value of more than £120bn into the UK economy. The potential costs of over-regulation may lead to large institutions moving operations overseas to less regulated areas.
Regulators need to ensure that changes are thought through with as much consideration of the effect on present and future business.
Under current circumstances, an increase in regulatory pressures on the financial services is inevitable, the experience required by them is evident – with several regulatory deadlines looming around the corner, we’ve seen growth within across both Operations and Finance, creating new opportunities for contractors with regulatory experience.