Financial Markets Regulatory Outlook 2023
Confronting the polycrisis
This annual assessment from Deloitte’s EMEA Centre for Regulatory Strategy explores how major regulatory trends will affect the financial services industry across UK and Europe in the year ahead, and how leaders can anticipate and respond to them effectively.
The 2023 edition of the Regulatory Outlook identifies nine cross-sector regulatory themes of strategic significance and explores three related spotlight topics. These themes and topics are summarised below and analysed in more detail in the report, along with recommendations for how firms can respond.
Resilience, vigilance, and positioning for change
In the global foreword we set out our view of the major regulatory strategy issues facing the financial services industry worldwide, first in terms of the immediate pressures created by the gloomy economic situation, and then in terms of three major structural changes: geopolitical, technology, and sustainability.
Strengthening transition plans and disclosures
Tackling climate change for real
Firms need to change gear on transition planning, from stating ambitions to setting targets and taking action to meet them, in order to anticipate increasing regulatory and wider stakeholder scrutiny.
Climate risk and the climate-nature nexus
Making managing environmental risk business as usual
Supervisors expect banks and insurers to accelerate improvements in their climate risk management capabilities. In particular, they will focus on whether and how policies and procedures have an impact on how firms steer their business.
Policy implementation begins
Regulated firms appear to be forging ahead with their digital assets strategies. However, recent events and market disruption - as well as heightened supervisory scrutiny - will inevitably require them to review their risk appetite and resilience profile.
Operational resilience and critical third parties
A year of real tests
With EU and UK operational resilience policy frameworks largely in place, 2023 will be the year where focus turns to implementation, with supervisors expecting to see tangible evidence of firms’ progress in building resilience.
Storm clouds forming
The gloomy credit outlook presents serious challenges. Firms should ensure that they have the capacity, skills and resources in place to deal with rising insolvencies and distressed borrowers.
More to come
2023 will see the final shape of updated UK and EU capital frameworks for banks and insurers emerge. While this will reduce policy uncertainty, the reforms will herald a more fragmented regulatory landscape for cross-border groups
Renewed focus on market resilience
In the wake of serious market disruption last year, we expect supervisors to focus on firms’ counterparty credit risk management frameworks, margining practices and booking arrangements.
Do you know what you’re looking for?
Firms will need to respond to growing supervisory concerns around the extent to which they understand and manage the risks posed by their extensive use of models, including in new and less well-understood areas such as climate risk and the use of AI/ML.
Running faster just to stay in place
Many firms’ capabilities to combat financial crime continue to fall short of expectations. Fixing these issues requires significant organisational change to eliminate silos, change resourcing models and leverage new technologies. All this will need to be delivered against a challenging economic backdrop.
Spotlight on the New Consumer Duty
Rolling out new protections
The cost-of-living crisis means that as firms are implementing the most material piece of UK cross-sectoral conduct regulation of the last decade, they will also be facing a real, market driven stress test of how they treat their customers.
Spotlight on the EU’s Digital Markets Act
The implications for financial services
The EU’s landmark legislation to crack down on the anticompetitive behaviours of digital and technology platforms goes live this year, presenting opportunities for financial services firms to capitalise on changing market structures.
Spotlight on the future UK regulatory framework
Significant change ahead
The Edinburgh reforms represent the most significant package of regulatory change since the UK left the EU. The consultations present a significant opportunity for the industry to shape the future of UK financial services regulation.
Access our interactive timeline tool for a high-level view of recent and upcoming regulatory milestones for the financial services industry.