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Tackling regulation - what we learned from Sibos

22 September 2011  |  3576 views  |  1

Regulation is a fact of life in the payments business but when it was discussed at Sibos, people seemed united in their opinions on how best it should be tackled. And common standards and communication are at the root of their recommended approach.

A regulation like Basel III is best implemented with a maximum harmonised approach across the globe, to avoid the risks of a non-level playing field and regulatory arbitrage. Under that regulation, managing the banks’ overnight and intraday liquidity generates a huge management information need, which is more easily attempted if common standards are brought to bear.

In turn, the harmonisation of technical payment standards is likely to benefit the customer and also level the playing field, but communication and collaboration with the technology providers are key here, as that will form the basis of working with the bank clients in the implementation of these standards. That does not mean however that everyone has the same products because of the common standards. On the contrary, they should be seen as a common set of foundations – what is built on top can be the bespoke and competitive elements.

In brief, there are three key take-aways:
• When faced with multiple regulatory changes, don’t just focus on single initiatives – take the holistic view. Many regulations are in practice interconnected and overlap, even though they are not all necessarily pulling in the same direction.
• The banks should communicate and collaborate on common standards with the regulators, their technology providers and their clients. This will keep the regulators calm, bring the expertise of the technology providers to bear, and will facilitate the adoption of the standards by the bank clients.
• It is in the interests of all the stakeholders to push for a global standards framework for payments. The securities and trade businesses are well ahead in that respect.

There is a momentum to overcome the reluctance to change – Carpe Diem!


Comments: (1)

Ketharaman Swaminathan - GTM360 Marketing Solutions - Pune | 23 September, 2011, 11:40

If there's one practical takeaway I gathered from a few successful regulatory programs (e.g. FPS) and other not-to-successful ones (e.g. SEPA), it's this: Regulators and banks should see themselves as being on the same side of the table. While purists might see such an approach as having similar hazards as letting MPs vote on a bill for their own pay rise, an adversarial positioning between regulators and banks doesn't help either. By often resulting in (a) Specs being fed in drip-feed mode (b) Unrealistic deadline pressures and (c) Stigma of missing cutover dates, an adversarial position discourages holistic views even within a single regulatory program and precludes any scope for out-of-the-box thinking around how a bank or FI could add business value to its compliance initiatives. 

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