Many financial firms see meeting compliance as one of their biggest challenges for 2011. Dodd-Frank is arguably the most comprehensive program of financial reform since the Depression era, embracing areas from interchange fees to derivatives. MiFID II and Basel III just add to the mix.
While many of the new rules are still being written, the impact of new regulation will be to make compliance integral to almost every part of a financial institution's activities. This makes unilateral action by individual areas of the business more difficult forcing greater collaboration across the enterprise between different parts of the firm.
From a technology perspective, this signals an end to fragmented and disparate systems and their replacement by a single technology infrastructure that brings front, middle and back office services into a single operating environment.
New regulation also promises a more transparent environment. Not only must new rules be adhered to but they must be seen to be adhered to. Managing compliance within a fragmented systems environment will soon become impossible and unacceptable.
Many IT systems in financial institutions are not well placed to support growth in a tightly regulated environment. So we are likely to see major upgrades in customer interfaces, trading technologies and back office systems all of which must be tightly integrated to facilitate better and faster communication, collaboration and oversight.
Competition is forcing financial institutions to become more innovative, implying more complex products and therefore even more oversight. This will only increase the pressure to create a more integrated and transparent enterprise.
Core to these initiatives will be the need to have better control over data, to share it more easily and to gather insight from it more quickly. In the past technology initiatives have been caught between the demands of individual lines of business (LOB) and the needs of the enterprise. Pre-crisis markets favored the LOB but the new regulated market reinforces the role of the enterprise.
The good news for financial institutions is that technology is moving in the same direction. Integrated platforms, connected applications and continuous services will redefine enterprise architectures. The disparate systems that have characterized financial institutions in the past will soon become part of their history.
Great comments on regulation David! Interestingly, for more than 7 years now, within the broker-dealer community, CxO's have had to acknowledge in writing each year that their broker-dealer is adhering to its written policies and procedures documents. Of course, these policies and procedures documents must align and support the regulatory obligations of the B/d. It certainly creates an incentive for the CxO to ensure they are getting things right.