Crises are often the catalyst for far-reaching change, and the current financial crisis is unlikely to be any different. From business models to executive remuneration, financial sector firms will find their activities being increasingly scrutinised and challenged by more intrusive regulators.
Adjusting to the new regulatory requirements will pose financial sector firms a series of challenges. Measuring risk accurately will demand vastly improved data management capabilities, and managing it effectively will require improved governance and risk-mitigation structures and processes. Dealing with a more intrusive regulator will also impact on firms’ working practices. To respond to these challenges, firms will need to adapt their training and recruitment programmes to ensure that they have the right skills mix within their organisation. Yet whilst making the changes required by the new regulations, firms will also face the added challenge of remaining cost-efficient, maintaining performance levels and meeting the needs and expectations of their customers. The challenge will be exacerbated by the emergence of new competitors as new firms enter the market as start-ups or from other sectors.
At the same time, the UK needs to ensure that the regulatory changes do not diminish the international competitiveness of its financial sector and the attractiveness of the UK as a financial centre. This means ensuring that the UK’s voice is clearly heard in the relevant international forums, such as the EU, so that supranational legislation does not damage British interests. It also means ensuring that other factors which make London an attractive place to do business are maintained.
The MCA’s insight paper, The New Landscape for Financial Services, provides firms with an overview of the coming round of regulation and some advice on how to respond to the challenges it poses.