How banks can prepare for a future of regulation in the digital era

ByHanover Team
Posting date: 27 January 2021

In recent years, there’s been a massive increase in the availability and use of data, which has shaped customer expectations and the way financial institutions operate. Amid the changing banking regulations, there’s set to be a sharper focus on financial technology, also known as fintech. It’s essential that banking firms prepare and respond to the changes, and make sure they’re compliant with the regulations. We’re in a new age of banking regulation tailoring and as a result of digital technology, there’s now extra scrutiny on firms to ensure their use of fintech doesn’t breach any regulatory standards. But how can banks prepare for a future of regulation as technology evolves?

The rise of fintech

From banking and investments to international money transfers and personal loans, fintech is changing every avenue of the financial sector. While the concept of using technology to streamline finances for customers is nothing new, there has been an upsurge in fintech in recent years. The 2008 global financial crisis has long been regarded as the catalyst for this change. At the time, traditional banking firms like Lehman Brothers were leading the way in finance, but the financial crisis changed the face of banking forever, ultimately leading to the creation of fintech companies. According to a US Treasury report, more than three thousand fintech businesses were formed between 2010 and 2017, generating over $22 billion in investments.

The financial services landscape has completely transformed. With fintech, customers have a number of options to manage their finances, such as through the use of mobile apps. Today, customers prefer convenient and efficient services that enable them to manage several tasks simultaneously. E-commerce innovation has also impacted banking, with PayPal paving the way for online payments when it launched in 2002. New technologies have allowed banks to innovate internally, as well as partner with other fintech companies to power and grow their services. With more data and analytics, banking firms need to ensure they remain regulatory compliant and organize their institutions accordingly.

The impact of banking regulations

As a result of technological changes and global reforms caused by the financial crisis, there are greater restrictions in the banking environment, and firms must understand the risks associated with fintech, and develop strategies to avoid costly penalties. One of the recent regulatory changes was introduced by the Federal Reserve Board (FRB). Known as Enhanced Prudential Standards, this framework offers new tailoring efforts, such as tailoring based on the size of trading assets, and simplifying reporting requirements for community banks.

Data management is also a high priority for bank regulators. Regulatory requirements mandate that banks in the US, UK and the EU, must share customer data, providing transparency and an open model. This means that users must be able to view their credentials and subscriptions and be able to control their data. Therefore, banking firms must focus on fostering compliance throughout their organizations, starting from board level. Bank firms should also consider investing in regtech, which has been on the rise over the last few years. Regtech companies offer automated regulatory reporting, providing companies with real-time monitoring of compliance and upcoming regulations. It’s little surprise that regtech has become one of the biggest areas of financial technology, and it holds enormous potential to re-shape the way banks operate and stay compliant.


What’s the future of risk management?

If banking firms want to thrive in the long-term and maintain regulatory compliance, they need to focus on digitizing as much of their processes as possible. As technology evolves, banks will need a strong understanding of data, analytics, customer databases, and how to manage risk in an increasingly changing environment. The digital era demands more agile risk management, so companies will need to focus on recruiting professionals with the right technological skills, as well as implement risk management best practices. While it’s difficult to predict what the future holds for risk management, there’s no doubt that the scope of regulations will continue to grow, with banks needing to protect themselves against a broad range of factors. If banks want to succeed in an age of increasing compliance, they will need to build strategic initiatives, deliver customer expectations, and create a well-managed risk function.

How Hanover can help your business

Today, banking firms will no doubt need to build operational resilience in the face of regulatory reforms. Hanover is a Specialist Talent Solutions Provider with expertise in the financial markets. We have vast experience in hiring the best talent for banking firms.

At Hanover, we support our clients with every challenge they face. We understand that hiring the best candidates requires a holistic and strategic approach. That’s why we constantly stay up-to-date on the market to help us understand what it takes to retain the best talent. Our executive search specialists are dedicated to providing our clients with an outstanding recruitment service. If you would like to get in touch, contact us today and take a look at our insights page for more articles.


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