As the journey to transition away from the London Interbank Offered Rate (LIBOR) continues to move forward, supervisors across jurisdictions have started approaching institutions to gain insights into their operational readiness. In Switzerland, a wide range of products with substantial contract volume is tied to LIBOR1. This includes lending products such as mortgages and derivatives.
This is the kick-off to our new series on the Future of Private Banking & Wealth Management. In collaboration with a number of leading executives of the Swiss Private Banking sector we developed a select number of likely scenarios for the future. In the next months to come, we will publish these scenarios as well as their implications on the industry.
On 23 January 2019, the Swiss Federal Tax Administration (FTA) published revised CRS guidance notes. The update mainly incorporates previously released guidance and disappointingly only contains limited material amendments. In addition, several examples (e.g. on the identification of controlling persons) and explanations (e.g. on the wider approach) were removed, without changing the underlying rules and thus having a limited impact. Finally, a number of linguistic errors and references were corrected, one of which also resulted in a re-release on 28 January 2019. Read on for a summary of the most important changes for Swiss financial institutions (FIs).
Artificial intelligence (AI) is poised to change the way financial institutions operate. One change is that data scale will become more important than asset size in building a successful business. Another is that revenue will come not from standardization but from the highly customized products and personalized interactions that AI makes possible.
Open banking provides the foundation for real business opportunities that are tangible and disruptive. On the one hand, clients of financial service providers clearly benefit from a more client-focused approach with greater service diversification and the ability to better control their own data. On the other hand, financial service providers will be able to collect and analyse real consumer data in order to offer more innovative products and services. This has already proved particularly effective for retail banks, which are at the forefront of open banking initiatives. We have identified three areas that are currently shaping the Swiss open banking landscape: Real time sharing of account data, direct initiation of payments and real time provision of information.
In the absence of any extension, the deadline for submitting IRS Forms 1042 and 1042-S on behalf of tax year 2018 is 15 March 2019. The recent conclusion of periodic reviews of Qualified Intermediary (QI) compliance highlighted repeating issues with regards to Form 1042 reconciliation and U.S. tax reporting compliance.
Artificial intelligence or ‘AI’ – whatever we actually define it as - is transforming the way we do business in financial services: the increased importance on the scale of data, more customised offerings, and a more sophisticated interplay of humans and automation.
In a nutshell, AI and analytics enable five key capabilities – customisation (of experience and service, optimising outcomes), foresight (to predict what is likely to happen), decision making (to recommend or automate specific decisions based on the best outcome), interaction (between computers and humans) and pattern detection (to understand themes and regularities in context). In collaboration with Deloitte, in order to understand the impact of these capabilities on the global financial services industry the World Economic Forum released a report titled ‘The New Physics of Financial Services: Understanding how artificial intelligence is transforming the financial ecosystem
Keeping up with innovation and disruptive competitors is a strategic necessity for all financial service providers. Open banking should be more than just a buzzword for Swiss financial institutions. While regulation in Europe is forcing banks to innovate and open their systems towards third parties, banks in Switzerland appear to fear the impact on their business models. Open banking can though provide banks with an opportunity to differentiate themselves by improving current services and developing new and innovative products.
Ho, ho, ho! IRS fills financial industry Christmas stockings with relief and extended implementation deadlines
On 13 December 2018, the US Internal Revenue Service (IRS) issued proposed regulations reducing the burden for financial institutions under the QI and FATCA regimes (hereafter referred to as the proposed burden reduction regulations).
The proposed burden reduction regulations provide welcome relief with respect to various obligations under the QI and FATCA regimes that worried the financial industry in light of the upcoming responsible officer certification and the expiration of certain transitional relief provisions. This blog summarizes the aspects of the proposed burden reduction regulations we consider most relevant for non-US financial institutions.
London interbank offered rate (LIBOR) is a UK regulated and administered comprehensive set of benchmarks across a number of standard maturities and major currencies. Given how pervasive LIBOR is in the global financial system, any discontinuation of LIBOR will have far reaching implications. 2018 has seen regulators increasing pressure on firms to prepare for the transition away from LIBOR to new risk-free/nearly risk-free rates (RFRs). While new interest rate derivatives and cash markets continue referencing LIBOR, public authorities and private sector working groups have jointly selected overnight RFRs options that are being adopted by market participants. The adoption of RFRs though remains at a low level to date.
With the publication of the eagerly awaited draft ordinance on 24 October, FIDLEG became more tangible and its provisions were sharpened. Based on the information available today, FIDLEG has similar objectives as the equivalent European legislation MiFID II and PRIIPs but applies a principle-based approach and is less detailed and prescriptive. Both legislations cover very similar requirements with a little twist in the details.
In light of the published draft ordinance, Deloitte hosted the webinar “FIDLEG: Seeing beneath the surface ”. The objective of the webinar was to address the provisions refined by the ordinance and outline their operational impact on financial organisations, while highlighting key commonalities and differences to European legislation. Alongside the webinar, the participants provided valuable insights regarding the FIDLEG implementation within their organisations. The fifth blog post in our FIDLEG series considers the outcome of these poll questions and addresses the implications for a successful regulatory journey.