Financial Services: regulating the new reality

As the focus of government and businesses moves from initial response to the COVID-19 pandemic, through resilience concerns, to recovery and the new reality, financial services regulators are also expected to move into a new phase of adjustment and support. 

The first paper in the series, available now, looks at how the financial services industry is being called upon to support recovery. Regulators are seeking to encourage growth and innovation but are still focused on resilience and good conduct. And all parties need to embrace the evolving new reality, including accelerated use of technology, longer-term changes in working practices and demands for sustainable finance.

More to come as part of this series...

Over the coming months, look out for further articles and papers in which we will consider in more detail key regulatory themes such as:

• The pandemic as a global stress event for all businesses’ financial, commercial and operational resilience – how regulators will require firms to consider and embed lessons learned.
• How policy makers and regulators might unwind concessions and restrictions imposed in response to the pandemic, and restore capital positions and other buffers, without creating unintended consequences.
• Ways in which the financial sector, and specifically the non-bank sector, can support the re-capitalisation of the economy following reopening of debates about contributors to capital market volatility.
• Impact on market infrastructure – how might regulatory perspectives shift?
• Renewed focus on people – regulatory expectations about firms’ behaviour towards customers have been re-articulated. As remote working is likely to remain a major factor going forward, there will need to be a wide-ranging review of employment and remuneration policies, and of long-established governance arrangements and controls.
• The potential for opposing tensions of convergence and divergence in regulatory approaches as firms navigate the raising and lowering of national borders.
• Accelerated adoption of technology and an increasingly digital environment – as normal supervisory processes resume, the challenge for regulators will be whether they, too, now need to engage in a different way.
• Last, but by no means least, ESG is a strategic issue that must be embraced across every aspect of firms’ business activities. Governments and regulators have indicated sustainability will form part of the future recovery.