Ernst & Young global Financial regulatory reform report: Challenges facing banks and actions banks can take
Beijing, 6 December 2012 - Ernst & Young releases the report, “Financial regulatory reform: what it means for bank business models”. The report presents an overview of the global regulatory reform agenda and the impact it will have on banks’ business and operating models. According to the report, the regulatory landscape has changed in a fundamental and lasting way at a time when banks are facing broader as practical challenges from the difficult economic and financial environment and associated strains on their business models. Banks must ascertain the overall impact of these changes and timely adjust their business strategies.
Regulators across the globe are moving forward to implement the G20 financial reforms at the national and regional levels. While the main pillars of the reforms appear settled, many of the details regarding national implementation of regulations, such as Basel III, the Dodd-Frank Wall Street Reform and Consumer Protection Act in the US and, in the European Union (EU), the Capital Requirements Directive IV, still need to be finalized. Moreover, national variation in the implementation of global regulatory reform continues to pose significant challenges to banks as they re-evaluate the implications of the reforms for their business models, structure and operations. Nevertheless, enough is now known about the new regulatory landscape for banks to think strategically about the aggregate impact and to consider the effects of regulatory changes in the broader context of efforts to reshape and strengthen the business.
Geoffrey Choi, Banking and Capital Markets Leader for Ernst & Young in Greater China, said, “China, as one of the member states of G20, has proactively participated in the development of the financial reform package. At present, China is steadily driving forward the implementation of the new regulatory standards in light of its domestic banking landscape. These efforts not only are in line with the broad initiative of global financial regulatory reform, but also are beneficial to the enhancement of China’s financial stability and the transformation of China’s banking sector. Chinese banks need to accelerate the transformation of their business model away from overreliance on capital. This is also an opportunity for them to improve their risk governance framework and upgrade their overall risk management capacity.”
To help banks assess how the changing global regulatory landscape affects them, Ernst & Young has established the Global Regulatory Network, which brings together former senior regulators across its global practices. Its global regulatory services are led by an executive team of former senior regulators, including members of the Basel Committee on Banking Supervision and the European Banking Authority. This team drives Ernst & Young’s strategic outlook on the global regulatory themes affecting its clients, including capital, liquidity, resolution and recovery planning, risk governance and other emerging topics in banking regulation.
Stefan Walter, the Global Bank Supervisory and Regulatory Policy Lead for Ernst & Young, said, “While the regulatory fine print is not yet in place, the message is clear: those firms that can best understand how regulatory change affects their business models, and that can develop a strong governance framework to link business and regulatory strategy effectively, will find themselves in a stronger position to adapt to this new environment and move ahead of their competitors in the new landscape.”
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This news release has been issued by Ernst & Young, China, a member of the global Ernst & Young organization that also does not provide any services to clients.
