Tapestry Bank Governance Leadership Network Summit 2012

Regulatory agenda: implementation and implications

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Uncertainty about the ultimate form that regulation will take and the likelihood of significant differences across jurisdictions have inclined bank boards and management to take a wait-and-see approach over the last few years when it comes to formulating a strategic response.

2012 may well represent a turning point. While important questions about impending regulation remain with the details still to be worked out, it is relatively clear where the regulatory environment will land.

Post financial crisis, we thought there would be a return to normal. Now, it's a new normal.

Six hard truths about the environment in which banks will operate over the next decade or more include:

  • Harmonized minimum standards reduce the risk of a race to the bottom, but will not create a truly global level playing field.
  • Banks will be pushed to adopt meaningful common capital requirements.
  • Significant structural reform is coming.
  • Supervision will remain intensive, and may get more so.
  • SIFI status will become commonplace at the global and domestic level.
  • While the debate continues as to whether new regulatory requirements will stem growth, policy reversals are unlikely.

Overall, summit participants seemed more inclined this year than in years past to accept the new regulatory realities. Indeed, there is a shared sense that it is time for banks to get on with planning for a future predicated on the new regulatory environment.