Despite significant changes on many fronts, it is still not possible to move on completely from the last crisis due to reforms and policies that still need to be implemented. Of these, Basel III and the interbank offered rate (IBOR) transition are areas where banks must maintain momentum.
At the start of 2020, market participants running Basel implementation programs hope for more clarity on implementation timelines and signs of only limited regional divergence.
As for IBOR transition, the current view from supervisors is that, although a major project for most banks, the overall level of preparedness appears to be below what might be expected. In general, IBOR exposures have not been reduced as much as regulators would wish, and scrutiny of transition plans will intensify in 2020.
In addition to the specific challenges of programs such as Basel and IBOR, firms should ensure that their risk and governance structures keep evolving, particularly in two key areas:
- Accountability regimes continue to be implemented or expanded in the major international financial centers and are now reaching the stage where the newer models are learning lessons from their forerunners.
- Financial crime has become a major legacy risk, and local and international pressures to reduce the volume of money laundering and other criminal activity remain high.
In 2020 and beyond, legislators and policymakers must address difficult questions on the trade-off between transparency and privacy, and use of data, so that technology can make bigger inroads in the fight against financial crime.