Deloitte’s financial services practice is the largest professional services organization in the world. This offers me the daily opportunity to work with clients and address their heart of business issues. It means that I see global, regional, and national financial services organizations in action. I see how they face the current market and how they plan for the future offered by the disruptions taking place.
We are in the early stages of a technology driven transformation of the financial services industry globally.
Banks and their clients have to comply with new MiFID II/MiFIR rules and obtain unique Legal Entity Identifiers (LEI) since January 2018. Otherwise, banks are no longer allowed to execute trades on behalf of their clients. Deloitte Managed Services demonstrates how managed service providers should adapt and extend their offering in compliance with new regulatory demands on their clients. The new LEI portal helps banks and legal entities to understand the new regulations and to get compliant with the new MiFID II/MiFIR – LEI requirements.
Industry asked for more time to make the FATCA and QI Responsible Officer (RO) certifications and it appears as though the IRS have listened, but at what cost? While some of the major issues have been addressed, it becomes more and more apparent that the FATCA and QI RO certifications will be onerous and will require significant attention from the ROs and their teams.
The most successful banks are able to benefit from outsourcing activities and at the same time manage the associated risks. Not all banks have been successful in managing risks from outsourced activities and in response FINMA, in its revised circular 2018/3, mandates minimum risk management requirements for outsourcing activities by banks, securities dealers and, for the first time, insurance companies domiciled in Switzerland as well as branch offices of foreign insurance companies. The revised FINMA Circular 2018/3 will come into force on 1 April 2018, although there are transitional arrangements for outsourcing arrangements already in place on that date.
This blog sets out the key regulatory requirements in the Circular.
Lugano Banking Day, 20 March 2018: Opportunities for the Swiss and Ticino financial sector in the era of FinTech
We were delighted to take part in the inaugural Lugano Banking Day, which attracted over 700 participants from the Ticino banking sector – the third largest financial centre in Switzerland. In a day full of interesting discussions on trends in the financial technology industry, we were glad to share ideas about the future role of traditional financial services in the era of digital transformation.
Radical technological innovations in the financial services industry are pushing the banking sector to reconsider existing business models and operations. However, over the last ten years, Swiss banks have already demonstrated an impressive capacity to adapt their way of conducting business in order to mitigate the effects of the global financial crisis, and regulatory changes in the area of tax reporting. Accordingly, the speakers at the Lugano Banking Day 2018 expressed confidence and optimism, and the disruptive nature of FinTech was perceived as much more of an opportunity than a threat for the financial sector in Ticino and the rest of Switzerland.
A survey conducted among 15 Deloitte member firms in Europe on the go-live experience shows that most banks are not yet fully compliant with all elements of the MiFID II regulation. They face operational challenges regarding topics such as Best Execution, Transaction Reporting, Market Infrastructure and Client Information duties.
With the focus being on finalizing outstanding implementation tasks, it is also important to look on the road ahead. Day 2 drivers like the strategic optimization of the operating model have to be taken into account and planned for.
A second blog will deep dive into the most challenging MiFID II topics and how new technology should be in focus when planning Day 2 activities.
Capabilities instilled by Artificial intelligence (AI) have the potential to radically change the way banks operate – a fact that increasingly puts AI on the executive agenda. In this blog post, we explore how existing AI applications can impact operating models of retail banks today. While there is already a large number of applications in place, the majority of these only enable innovation around the core thus instilling only limited change to the existing business. We believe, however, that banks should consider looking beyond their core to identify how AI can transform their business models, thereby unleashing additional value.
The FATCA Responsible Officer certification - the clock is also ticking for trustees and other sponsors
Under the Foreign Account Tax Compliance Act (FATCA), the definition of foreign financial institution (FFI) includes any non-U.S. entity that qualifies as an investment entity. It is yesterday’s news that FATCA insisted that trusts are entities and that trusts have obligations to identify account holders. The headline for today is that despite only proposed guidance being available, the trusts’ Responsible Officers (ROs) will be required to certify in less than five months.
The FATCA regulations and most FATCA intergovernmental agreements (IGAs) permit less burdensome compliance paths including the possibility to be sponsored by other entities, which fulfil the FATCA obligations on behalf of the sponsored entity. Under these arrangements, an RO is still required, which means that the upcoming 1 July 2018 RO certification deadline is rapidly approaching.
In this blog, which is the third in a five-part series, we will explore the various types of RO certifications for deemed-compliant FFIs. In particular, we focus on sponsored FFIs (i.e. sponsored investment entities, sponsored controlled foreign corporations and sponsored closely held investment vehicles). We also highlight the requirements for trustee-documented trusts (TDTs) and registered deemed-compliant FFIs (other than reporting Model 1 FFIs) and thus remind you that the clock is also ticking outside the banking community.
For banks to attract new clients and to forge deep relationships with their customers, they must be prepared to deliver more than existing digitised products and services. The time has come to truly reimagine how to engage with clients to create services and products that are centered around a meaningful customer experience. Banks that embrace customer experience perspectives do not only see an immediate positive impact in their market, a customer centric approach can also be a key differentiator if the bank understands the expectations of future clients.
This is the first post of our blog series to provide insights into the opportunities and challenges of customer experience in the banking industry.
On 1 January of this year, IFRS 9 became effective for banks. The changes introduced under IFRS 9 include a new approach to the provisioning of loans and receivables that is based on an expected credit loss (ECL) concept. For certain banks, the transition to the new approach could lead to a severe increase in provisions associated with their loan portfolio and, hence, to a severe reduction of their shareholders’ equity base. In principle, an increase of provisions reduces regulatory core capital on a dollar-for-dollar basis. For IRB banks, this principle applies only where provisions are in excess of the regulatory expected loss (EL).