Three major trends that produce risks for financial markets and priorities to adress these risks
Annual Report 2017 Dutch Authority for the Financial Markets
The Dutch Authority for the Financial Markets recently published its Annual Report over 2017. Whilst innovation was just one of many buzzwords lately, the AFM has continuously made an effort to strengthen and renew its supervision on the financial markets. What is to be expected for the coming period?
In its multiannual framework the main goals for 2016-2018 can be found. The Annual Report 2017 reflects on the current situation and gives a quick outlook. The AFM identified three major trends that are producing risks for financial markets and financial consumers alike:
- Increasing digitalisation
- Low interest rates
- Blurred borders of financial markets
In determining her strategy, the AFM has paid great attention to a top-10 of risks that can be detected within the financial sector. .The AFM also wishes to be a demonstrably groundbreaking supervisor in 2022.
Thus, an extended strategy for striving to a fair and transparent financial market has been formulated by defining three priorities:
- Reducing undesirable risks in the financial markets through regular and thematic supervision;
- Strengthening and renewing supervision through focused investment in technology and methodologies;
- Increasing the effectiveness, efficiency and adaptability of the AFM’s organisation.
What has the AFM achieved in regard of her focal points? In her annual report the AFM gives a quick overview of the results in these areas of focus.
Regarding to her first priority, the AFM has closely monitored different trends. Also, the AFM has had an active role in legislation, such as MiFID II. In order for market parties to be optimally prepared for the upcoming changes, the AFM has organized several seminars and workshops. Another area that requires attention is (the development of) the duty of care. An ongoing and intensive monitoring of consumer related issues is thus a big part of the activities of the AFM.
In the area of strengthening the supervision by technology and innovation, the AFM has given her second priority a lot of attention. In the footsteps of the Regulatory Sandbox of the FCA, the English counterpart of the AFM, the AFM has initiated the InnovationHub. Within this hub, market parties that wish to launch an innovative service or product, can engage more easily with the supervisor. As such, they gain more knowledge about the type of supervision they will be dealing with, which will help develop their service or product more easily. Also, the AFM can get a great insight in the early stages of the new developments in the financial market.
The above are just a few examples of the action that is being undertaken by the AFM. In addition to the different ways the AFM monitors the changes in the regulatory landscape, the AFM also has an enforcing role. We expect that she will be more strict than usual in the coming period. Since there have been a lot of changes these last few years, the AFM has had a more condoning attitude during this transition period.
With the urge for market parties to innovate and renew themselves and the legislative changes that are to be expected, it is important to be aware of all implications and think outside the box. As an example, the AFM recognizes different flaws in handling data and urges the financial institutions to respond in an adequate matter. Using different types of data can be incredibly useful and the AFM acknowledges the endless possibilities it entails. However, when exploring new areas one must fully grasp the risks that come along with it. With our experience with the focus areas in combination with our innovative mindset, we believe that we can assist you within a broad scope of activities.
Deloitte’s Regulatory Risk Team
Deloitte Regulatory Risk has a dedicated team of professionals closely following regulatory and supervisory developments. Based on our extensive experience working for FI’s we quickly spot developments in the regulatory/supervisory space. We are contributing to the Deloitte Banking Union Centre in Frankfurt, providing in-depth insight in the developments with respect to the banking union/SSM/SRB. Our Global Centre of Regulatory Strategies is a source of insight on regulation and supervision across the globe.
Want to know more on how to deal with risks in the financial market? Please contact Martin Eleveld, Eelco Schnelzer or Joes van Berkel via the contact details below.