Financial Regulatory Reform: the Primary Driver Fueling Overhaul of Banking Operations

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Regulators across the globe are moving forward to implement the G20 financial regulatory reforms at the national and regional level while also fueling historic changes in traditional banking operations, While many of the details regarding national implementation of regulations, such as Basel III and Dodd-Frank, still need to be finalized, enough is now known for the industry to consider how bank business models need to change and where to mine new opportunities, according to a new Ernst & Young LLP report.

As the banking industry recalibrates following the economic downtown, the financial regulatory reform agenda has emerged as the key factor powering unprecedented change in global banking operations, according to a new report issued by Ernst & Young LLP. The study, “Financial regulatory reform: what it means for bank business models,” found the regulatory reform agenda is dramatically influencing how banks reshape their business strategy, from products and services to operations and geographic locations.

“We have a huge interdependency now between what’s happening on the global regulatory reform agenda and banks’ business strategies,” said Stefan Walter, Principal and Chair of Ernst & Young's Global Regulatory Network and former Secretary General of the Basel Committee on Banking Supervision. “Those two are really intertwined in a way that is unprecedented, causing an overwhelming amount of change for the industry to manage.”

While some of the new regulatory policies still need to be finalized, the industry has shifted its focus from preparing for potential changes to devoting the majority of its resources to implementing the main pillars of the G20 financial reforms.

“Reforms to address the probability of failure are virtually complete at the global level and are being implemented nationally,” said Walter, who also authored the report. “Reforms to reduce the severity of failure are not as far along, and there is still a fair amount of work to be done at the global and national levels.”

Nonetheless, Walter emphasized enough is known now for banks to anticipate the impact of regulatory change in their markets and to alter their business models accordingly. He advises banks develop much stronger decision-making frameworks and tools to assess the trade-offs between business opportunities and a new set of regulatory restraints.

The report details actions banks can take to respond to the new environment, including developing the capability to manage regulatory change across the enterprise, strengthening risk governance frameworks, enhancing and integrating data and reporting, and improving operational efficiency.

Read the full report and view video of Stefan Walter discussing the issues to learn more about Ernst & Young’s view on the progress of regulatory change and the opportunities for banks to gain a competitive edge.

About the Ernst and Young Global Regulatory Network

Ernst & Young’s Global Regulatory Network is an integral part of our Financial Services Office, and it enables us to offer banks unparalleled experience, leadership and insights on financial regulation. Our global regulatory services are led by an executive team of former senior regulators, including several members of the Basel Committee, the Financial Stability Board (FSB) and the European Banking Authority, and coordinated by former Basel Committee Secretary General, Stefan Walter. This team, supported by more than 100 other former regulators, drives Ernst & Young’s strategic outlook on global regulatory themes impacting our clients, including capital, liquidity, recovery and resolution planning, risk governance and other emerging topics in banking.

About the Ernst & Young Global Banking & Capital Markets Center

In today's globally competitive and highly regulated environment, managing risk effectively while satisfying an array of divergent stakeholders is a key goal of banks and securities firms. Ernst & Young brings together a worldwide team of professionals to help you achieve your potential – a team with deep technical experience in providing assurance, tax, transaction and advisory services. The Center works to anticipate market trends, identify the implications and develop points of view on relevant industry issues. Ultimately, it enables us to help you meet your goals and compete more effectively. It's how Ernst & Young makes a difference.

About Ernst & Young

Ernst & Young is a global leader in assurance, tax, transaction and advisory services. Worldwide, our 167,000 people are united by our shared values and an unwavering commitment to quality. We make a difference by helping our people, our clients and our wider communities achieve their potential.

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Ernst & Young refers to the global organization of member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients.

This news release has been issued by Ernst & Young LLP, a member firm serving clients in the US.

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