CFO report: the new era of banking regulation
Performance management at the enterprise level
“People understand conceptually ... that the world has changed. They're pleased that there's a planning and an IT framework to help them navigate it. But I think the challenge will be to actually apply this going forward.”Patrick Flynn, Chief Financial Officer, ING Group
To strengthen strategic decision making across the organization, banks are implementing robust, enterprise-wide IT systems to better manage and leverage capital.
They are equipping managers with better information on the economic impact of their decisions and developing more comprehensive frameworks to guide enterprise-wide decision making and performance management.
Before the financial crisis, banks had more freedom to allocate capital. Now, the regulatory standards will require banks to centralize capital management. Technology-intensive initiatives are geared toward optimizing increasingly expensive capital and funding across the organization within regulatory constraints and in line with overall strategy.
Despite the anticipated benefits, industry leaders foresee cultural challenges as people learn to operate within tighter frameworks that will determine which business units should grow and how.
Every large financial services organization in the world is investing in flexible IT and operating platforms toward the same goal: more and better information.
Information is a fundamental challenge, since most large banks have grown inorganically through acquisitions, and underlying data is commonly fragmented across combined organizations.
The challenge is to validate the integrity of data and create a construct of data that is easily accessible and consistently reliable.
“Organizations will spend hundreds of millions of dollars to build the capabilities that they're going to need, not merely to respond to current changes in regulation or reporting requirements, but to change fundamentally how they manage their financial performance, and risk and capital positions of their organizations,” said John Weisel, FSO Global Advisory Leader, Ernst & Young LLP.
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