Operational resilience and the evolution of the European banking sector

On the frontier

Regulatory activity is undergoing a profound shift to focus on risks arising from technology in the financial sector. This is happening as banks face mounting competitive pressures to transition to more digitally-enabled business models to control costs and keep pace with customer demands in an era of much faster innovation cycles.

This report looks at how strengthening operational resilience in banking can lead to a more effective digital transformation for individual banks and for the sector as a whole.

While there is a lot that banks and regulators can (and must) do on their own, their individual actions will only take them so far. The highly connected nature of technology systems in the financial sector requires a more joined-up approach. There is now an imperative for collaboration at all levels between the sector’s players – both public and private.

If the industry is unwilling or incapable of collectively preventing such disruption, for example by creating critical data backups and operational plans to mitigate against the consequences of cyber attack, then the Regulators must act. In the absence of market initiative, the Regulators should take stronger action to foster market solutions, or to enforce regulatory ones, to mitigate the risks of severe operational disruption.

- UK Parliament Treasury Committee report on IT failures in financial services, October 2019

We have identified five broad types of collaboration that should be front-of-mind for banks and their regulators in strengthening the operational resilience of the banking sector.

However, collective solutions can often take years to establish. The need for banks to improve their operational resilience is too urgent to put on hold. It is indispensable that bank boards and senior executives understand the commercial and regulatory imperatives of managing technology risks well and are prepared to invest appropriately in their capability to do so. We set out how the growing pressure for the banking sector to digitalise rapidly can mean that focusing on operational resilience, even through individual measures, will yield significant regulatory and commercial benefits well into the future.

About the Centre for Regulatory Strategy, EMEA

The Deloitte Centre for Regulatory Strategy is a powerful resource of information and insight, designed to assist financial institutions manage the complexity and convergence of rapidly increasing new regulation.

With regional hubs in the AmericasAsia Pacific and EMEA, the Centre combines the strength of Deloitte’s regional and international network of experienced risk, regulatory, and industry professionals – including a deep roster of former regulators, industry specialists, and business advisers – with a rich understanding of the impact of regulations on business models and strategy.

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