A quick scan into the 2024 financial regulatory outlook by Deloitte and how Cygnetise enhances compliance
In this blog, we do a brief overview of Deloitte’s recently published financial markets regulatory outlook for 2024 and the two biggest trends that are believed to be setting the sentiment in the sector.
Looking for smart digital solutions to optimise your compliance and regulatory tech stack? Cygnetise offers one of the few real-life practical applications of blockchain digitising the burdensome process of managing authorised signatories and bank mandates. Learn more here
As the global financial sector braces for a regulatory evolution, Deloitte's "Financial Markets Regulatory Outlook 2024" sheds light on the myriad of complexities and opportunities lying ahead. With economic slowdowns, geopolitical risks, and the rapid progression of digital technologies shaping the landscape, Deloitte emphasises the pressing need for agility, strategic foresight, and the adoption of groundbreaking technological solutions like Cygnetise, coupled with robust risk management frameworks, to sail through these challenging times.
Deloitte’s insightful financial regulatory outlook for 2024
Deloitte paints a scenario of a challenging year ahead, where Financial Services (FS) firms globally contend with the ramifications of stubbornly high inflation, sluggish growth, and persistently high-interest rates. These pressures, compounded by medium-term structural shifts driven by geopolitics, sustainability efforts, and digital innovation, put financial resilience to the test. Particular attention is drawn to the heightened credit risks in the commercial property and private credit markets and the banking sector's robustness amid volatile conditions.
A closer look at EMEA
The European financial sector, despite facing challenges like the UK LDI crisis and Credit Suisse’s case of a global systemically important bank (G-SIB) collapse, has shown remarkable resilience, bolstered by improved firm-level resilience and proactive interventions from governments, central banks, and supervisors. However, the uncertain outlook for European economies and the persistence of risks, including inflation above target and the aftermath of rapid rate rises, place regional financial players under scrutiny in 2024. Geopolitical tensions add to this complexity, potentially driving volatility and impacting asset quality and market risks.
Additionally, Deloitte has noted a significant migration of risk from the traditional banking sector to Non-bank Financial Institutions (NBFIs), with post-crisis regulatory reforms reducing banks' exposure to higher-risk activities. This shift challenges the traditional regulatory perimeter, prompting a need for a more comprehensive, NBFI-specific regulatory framework.
Following the global regulatory dynamics, the European landscape is also impacted by climate change, increased cyber risks, emerging technologies, and geopolitical fragmentation, stretching the bandwidth of Boards and senior management - further underscoring the need for robust risk management and strategic planning within organisations.
Sustainable finance and technological innovation: A dual focus
According to Deloitte, “sustainable finance” and “technological innovations in payments and digital assets” will be the two major focal points defining the evolution of financial regulation in 2024. The push towards sustainability is reshaping economies and financial systems globally, introducing firms to new operational landscapes and regulatory demands aimed at aligning with net-zero transitions. The spotlight remains on climate, yet the recent completion of the Taskforce on Nature-related Financial Disclosures (TNFD) framework signals an increasing focus on nature-related concerns, especially significant for banks under the European Central Bank (ECB) watch.
Technological advancements in AI, retail payments, and digital assets are also expected to drive some significant shifts in financial policymaking and regulation. For example, a new set of regulatory updates aiming to enhance payment systems through consumer protections, digital ID, stablecoins, and anti-fraud measures, within the EU and UK is to be rolled out in 2024/2025. These changes, in line with evolving consumer behaviours, will affect Payment Service Providers (PSPs), and require them to seek greater adaptability and investment in new capabilities.
Digital asset strategies and the regulatory framework for AI, particularly the EU's AI Act, put additional pressure on financial firms to balance innovation with risk and ethics considerations, highlighting the need for increased compliance and operational resilience.
Cygnetise's role in financial regulatory compliance and innovation
Cygnetise provides a blockchain-based solution that not only streamlines signatory authorisation and bank mandate management but also enhances operational efficiency and facilitates compliance with evolving standards. This secure, immutable record-keeping mechanism perfectly aligns with regulatory demands for transparency and accountability, providing a pivotal tool for financial institutions to achieve regulatory adherence.
Three key areas Cygnetise can help:
Enhancing operational resilience: Cygnetise's platform ensures signatory authorities are accurately recorded and easily auditable, aligning with the EBA's latest resolvability guidelines.
Contributing to ESG: By digitising the traditionally inefficient, paper-based process of signatory management, Cygnetise allows firms to contribute to all three aspects of ESG, namely:
1) reducing the use of paper,
2) increasing data transparency and reducing the risk of fraud, and
3) facilitating adherence to good governance frameworks and internal controls.
Blockchain technology pioneering: By empowering FS firms to adopt cutting-edge technology like blockchain, Cygnetise positions them at the forefront of governance and risk management innovation.
“The confluence of digital innovation and stringent regulatory requirements presents both a challenge and an opportunity for financial institutions. Navigating this landscape demands a proactive and agile approach to compliance and risk management.”
In conclusion, the 2024 regulatory outlook presents a multifaceted challenge for the financial sector, with significant implications for operational resilience, digital asset regulation, and compliance with ever-evolving financial crime regulations. Cygnetise's blockchain application emerges as a pivotal technology in this context, offering an innovative solution that enhances compliance, operational efficiency, and security. As financial institutions navigate the dynamic regulatory landscape, the integration of technologies like Cygnetise will be crucial for maintaining resilience and staying ahead of the compliance curve.