Regulatory agenda in 2015 will put banks under stress

Pressure to coordinate bank stress-testing across the UK, Eurozone and the US could gather pace in the year ahead, according to Deloitte’s 2015 financial markets regulatory outlook.

This follows one of the highest-profile stress testing exercises of 2014, the European Central Bank’s Comprehensive Assessment.  While this may be over, stress tests are expected to remain an important supervisory tool across countries.

David Strachan, partner in Deloitte’s EMEA Centre for Regulatory Strategy, said: “Murmurs about the need for cross-border coordination are becoming louder, as country authorities get comfortable with the role their own tests play in their jurisdiction. Banks will need to think long and hard how to join up their risk management and stress testing responses to provide ‘one-firm’ capability across countries.”

2015 will see supervisors continue to turn up the heat on banks, as they look for progress on how they are managing culture and the treatment of customers.

Strachan added: “Culture and treatment of customers will remain to the fore. No longer will regulators wait for misconduct to materialise before taking action – attention is now on susceptibility to harm, and taking preventative action. This means that behavioural practices, incentives and culture will be scrutinised more than ever. Everyone in financial services can now talk culture, but the real challenge is to ‘do’ culture. 

“Regulation is not going away as an issue for financial services any time soon, and banks will continue to bear the brunt of regulatory change in 2015. We may be shifting away from proposing new rules to implementing those that have been agreed, but there is an enormous amount left to do. Banks must implement new capital rules, begin work to reorganise their legal entity and operational structures, whilst dealing with an aggressive push on competition, especially in the UK. Standards and expectations have risen enormously across the board, and the price of getting things wrong is higher than ever.”

Deloitte’s Top 10 regulatory themes for 2015:

• Structural reform and resolution in the banking sector
• New institutions in action
• Data and regulatory reporting
• Culture and treatment of customers
• Competition and innovation
• Stress testing and risk management
• Capital Markets Union
• Business model mix in a world of multiple constraints
• Solvency II and insurance capital
• The interaction of market structures in different countries

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