Managing Regulations

What Happens If the Regulatory ‘Playing Field’ Is Not Level?

2:27 (Part 4 of 14)

Given that regulatory guidance is being developed by global regulators and policy makers to ensure the stability of global financial institutions but ultimately will be implemented at the national level, there are concerns about these standards being realized in a consistent way from one jurisdiction to another. “Banks grow globally and they die on a national basis,” says Ernst & Young’s Bill Schlich. “When they die is when … the rules that each different country imposes become very important.”

Also posted in Governance, Regulatory Arbitrage, Risk Management, Video 5: SIFIs Rules Are Recasting Global Banking |

How Will Additional Capital Controls Affect SIFIs?

3:15 (Part 5 of 14)

Increased capital requirements are lowering the return on equity for many global banks. However, stricter rules may help the “biggest of the big” financial institutions to be viewed as less risky or as “premier counterparties.”

Also posted in Governance, Regulatory Arbitrage, Risk Management, Video 5: SIFIs Rules Are Recasting Global Banking |

Risk-weighted Assets – What Happens When Enforcement Differs by Region?

4:35 (Part 6 of 14)

In addition to stricter capital requirements, SIFIs will have to manage risk-weighted assets. The dilemma for regulators is how much discretion to allow banks in assigning different levels of risk to their assets. There also is some tension between banks and different geographies, such as the U.S. and Europe, in terms of whether they are risk-weighting their assets in the same way.

Also posted in Governance, Regulatory Arbitrage, Risk Management, Video 5: SIFIs Rules Are Recasting Global Banking |

The Tension between ‘Too Big to Fail’ and Moral Hazard Continues

7:05 (Part 7 of 14)

On the one hand, SIFI designation can restrict banks with tighter rules. On the other hand, the designation could cause some investors and counterparties to view a SIFI as more likely to get bailed out if trouble arises. Regulators continue to struggle to find the right balance.

Also posted in Governance, Lessons Learned from the Financial Crisis, Regulatory Arbitrage, Risk Management, Video 5: SIFIs Rules Are Recasting Global Banking |

Will SIFI Designations Succeed?

4:52 (Part 8 of 14)

Many observers see the SIFI designation process as an improvement over how risks were governed in the past. Ideally, a fully functioning SIFI regime would provide a seamless regulatory process across borders. But variations in how different jurisdictions might handle an actual crisis mean that much uncertainty remains.

Also posted in Governance, Lessons Learned from the Financial Crisis, Regulatory Arbitrage, Risk Management, Video 5: SIFIs Rules Are Recasting Global Banking |

The Business Impact and Cost of Resolution and Recovery Plans

7:00 (Part 9 of 14)

Living Wills – or Recovery and Resolution Plans – are costly and time-consuming to prepare. But banks are gaining important benefits from the exercise, including a deeper understanding of their organizations, particularly when it comes to capital and liquidity issues.

Also posted in Governance, IT Investments, Lessons Learned from the Financial Crisis, Risk Management, Video 5: SIFIs Rules Are Recasting Global Banking |

A New Category of Banks Beyond SIFIs

3:19 (Part 10 of 14)

The largest of large banks – perhaps the top five global banks – could face onerous restrictions as regulators try to cap the size of universal institutions. Will creating this “last bucket” category dim the outlook for bank mergers and acquisitions?

Also posted in Governance, Lessons Learned from the Financial Crisis, Risk Management, Video 5: SIFIs Rules Are Recasting Global Banking |

The Outlook for Mergers and Acquisitions

3:13 (Part 11 of 14)

Are there too many financial institutions in the world competing for existing business? Some observers say yes. Yet, potential restrictions on mergers and acquisitions to prevent the creation of megabanks could make consolidation more difficult.

Also posted in Banking: Future Growth Models, Governance, Lessons Learned from the Financial Crisis, Risk Management, Video 5: SIFIs Rules Are Recasting Global Banking |

Do Non-regulated Institutions Have an Advantage?

4:32 (Part 12 of 14)

Are banks at a disadvantage compared with unregulated non-bank institutions, such as hedge funds and money market funds?

Also posted in Banking: Future Growth Models, Governance, Lessons Learned from the Financial Crisis, Video 5: SIFIs Rules Are Recasting Global Banking |

Recommendations for CEOs of Global Banks

5:27 (Part 13 of 14)

Key considerations for bank CEOs include understanding more deeply their customers and the services they need, identifying growth opportunities and using technology to strengthen their firms’ ability to adapt nimbly to changing conditions.

Also posted in Banking: Future Growth Models, Customer Focused Products, Emerging Markets, Governance, IT Investments, Lessons Learned from the Financial Crisis, Retail Banking, Risk Management, Video 5: SIFIs Rules Are Recasting Global Banking |

Identifying Future Risks

3:31 (Part 14 of 14)

As banks increasingly rely on automated systems to meet customer needs, security issues around information technology will become critical. The relationship between risk and executive compensation models also will be an area of greater focus.

Also posted in Governance, Innovation Revisited, IT Investments, Lessons Learned from the Financial Crisis, Risk Management, Transparency, Video 5: SIFIs Rules Are Recasting Global Banking |

Technology Investments and Employee Training

6:15 (Part 3 of 7)

Meeting all the new regulatory requirements will take a new level of information technology prowess – and investment.

Also posted in IT Investments, Video 3: Putting Together the Global Banking Puzzle |

Will Banks Continue to Pursue Complex Investment Vehicles or Focus on Core Competencies?

4:16 (Part 5 of 7)

Some customers will still require complex instruments. But what are the capital implications for the bank regarding how it prices the product and what can work for the investor?

Also posted in Banking: Future Growth Models, Innovation Revisited, Lessons Learned from the Financial Crisis, Video 3: Putting Together the Global Banking Puzzle |

Tier I Capital Reserve Requirements in Basel III

6:32 (Part 6 of 7)

Under Basel III, countries deemed to have an asset bubble of some kind would have to raise reserves. Is such a system workable?

Also posted in Video 3: Putting Together the Global Banking Puzzle |

Putting Together the Global Banking Puzzle

32:54 (Full video)

Given the widespread shake-up in banking regulations at all levels, global bankers face a jigsaw puzzle-like set of challenges, including a repositioning of risk management, a need for technology investments to satisfy regulators and customers, and new Tier I capital requirements. In this series of video clips, professionals from Wharton and Ernst & Young offer their views on these and related issues.

Also posted in Banking: Future Growth Models, Emerging Markets, Risk Management, Video 3: Putting Together the Global Banking Puzzle |

Are Markets Pricing Re-regulation into Equity Values?

3:22 (Part 1 of 8)

Should banks shore up balance sheets with common stock before Dodd-Frank and Basel III reduce their return on equity, or are markets pricing in this re-regulation?

Also posted in Risk Management, Transparency, Video 2: Regulatory and Growth Challenges Face Global Banks |

Recapitalization in the Asia-Pacific Region

2:35 (Part 2 of 8)

What worries banks in the Asia-Pacific region most about Basel III is the liquidity measures. Meantime, banks there are shifting to more medium- and long-term funding.

Also posted in Emerging Markets, Lessons Learned from the Financial Crisis, Video 2: Regulatory and Growth Challenges Face Global Banks |

The Impact of Increased Regulatory Costs on Customers

6:49 (Part 3 of 8)

Banks will have little choice but to pass on the costs of re-regulation to consumers, at least over the short run.

Also posted in Rebuilding Trust, Retail Banking, Video 2: Regulatory and Growth Challenges Face Global Banks |

Regulation’s Effect on Existing Business Lines and Talent Retention

5:42 (Part 4 of 8)

Should financial services companies try to retain top proprietary trading and fun management staff now heading towards the exits in anticipation of the regulatory changes?

Also posted in Banking: Future Growth Models, Lessons Learned from the Financial Crisis, Video 2: Regulatory and Growth Challenges Face Global Banks |

The Volcker Rule and Regulatory Arbitrage

5:12 (Part 5 of 8)

Each country will decide for itself how to create a safe banking environment and not all key markets will choose exactly the same road. That will put some countries at a disadvantage.

Also posted in Emerging Markets, Regulatory Arbitrage, Transparency, Video 2: Regulatory and Growth Challenges Face Global Banks |