Banks have always needed to manage regulatory change management to ensure that they were complying with the latest banking regulations. However, banks now need to be more flexible than they were before, thanks to the nature of upcoming banking regulations. Let’s look at a some of the factors which will have a major effect on banking regulations in 2019.
Fintech has become a force to be reckoned with on the backend, but it is now coming to the front-end. Banks are using GRC, Regtech, and several other Fintech technologies to improve productivity and efficiency while lowering costs. There hasn’t been much innovation on the customer side of things. Banking is still a slow process for customers and that is in part due to the banking regulations in the United States.
A major problem with consumer facing Fintech is that the current banking cyber security regulations do not allow banks to share customer data easily. These regulations were made to keep customer data safe but they were not made with Fintech in mind, because they were made before Fintech became mainstream. Customers cannot use Fintech applications with their bank accounts because the process for apps and financial services to get information from banks is very complicated. This is hindering Fintech innovation as well. We can expect changes to regulations to allow easy access of information while still keeping the information secure.
See our recent post Why do we need GRC Technology?
Politics Casting a Long Shadow on Banks
Politics have always played a major role in banking regulations all around the world. The banking and financial services sector is a very influential part of the economy and society and directly affects the lives of all citizens. What is new in 2019 is how politically charged the environment has become for banks. While Republicans and Democrats have always had their differences when it comes to banking, there has been a lot of unity and the banking sector has been supported multiple times with bipartisan support.
That may soon be changing. The nature of the conversation has changed, and the Overton window has shifted for banking and wealth. A lot of credit goes to Alexandria Ocasio-Cortez, the social democrat who is talking about raising taxes and changing the way our economy works, but she is not the only politician doing so. Elizabeth Warren, who has announced that she is running for president, has also unveiled a major plan to increase taxes on the wealthy and close banking loop holes which allow businesses to avoid taxes.
This would not be much of a problem under normal circumstances. It is tough to beat an incumbent president which is why every president after George H.W. Bush has had two terms. The future of the current administration is surprisingly unpredictable. While there are a lot of reasons, they may not get a second term, there are also a lot of reasons they might, and then there is the fact that they have already had a major unexpected victory.
We recently publish blogpost regarding Finding Issues and Conflicts Before the Regulators Do; A GRC Approach
Banks thus cannot predict banking regulations in the United States for the next year, which creates a major problem. How does one decide which course to take if the map changes while they are on the journey? Banks cannot commit to any outcome and plan accordingly. The smart way to ensure that all regulatory changes are managed without causing disruptions is to instead become flexible. Instead of simply creating plans for the most probably outcomes banks also need to look at the way they operate and see how they can increase their flexibility when it comes to banking regulations.
GRC and other Fintech solutions will play a major part in ensuring this flexibility. GRC helps by allowing banks to stay updated about new regulations and quickly comply with any changes. This is something which more banks will need going into 2019. If your bank is also looking for a better way to be prepared for regulatory changes, you should see what the Predict360 regulatory change management solution can do for your organization.
About the Company
360factors, Inc. (Austin, TX) helps companies improve business performance by reducing risk and ensuring compliance. Predict360, its flagship software product, vertically integrates regulations and requirements, policies and procedures management, risks and controls, audit management and inspections, and on-line training and qualifications, in a single cloud-based platform based on artificial intelligence.