2012 was mainly dominated by financial regulation. Almost all budgets have been allocated to projects aimed at achieving regulatory compliance or absorbing the impact of new regulatory requirements on a financial institution business model, system landscape or processes. With ongoing delays in key regulatory initiatives like the Dodd-Frank Act, EMIR, or Basel III, just to name a view, 2013 will be another year of financial regulation consuming most of the available budget.
According to several impact studies for Basel III, banks around the world need to increase their capital by EUR 400 to 500 billion! Some respected consultancies even predict 1 trillion USD. On top of that, banks need to improve the quality of capital as well, since banks are supposed to have three times the currently mandatory tier one capital. This does not leave a lot of room for innovation and efficiency.
But, even in times where capital is scarce, budgets are eaten up to meet regulatory demands and profit generation is aggrevated due to low interest rates and tough market conditions, financial institutions are forced to improve efficiency, lower costs, and adapt their business model in 2013 in order to stay competitive and recover from the financial impacts caused by regulation in the long run.
Such major opportunities with a direct impact onto an institution’s profitability have been identified already and are ranked very high in 2013′s to do list.
Based on feedback from our clients and after reviewing our current client engagements, we highlighted some of the hottest challenges and opportunities that financial institutions will face in 2013:
1. Enterprise collateral management including simulation and optimization
2. Dedicated desks to manage collateral and CVA
3. On demand enterprise simulation (bank management)
4. Regulatory compliance (Basel III, Dodd-Frank, EMIR, FATCA, MiFID II, etc.)
5. Cost efficient and competitive asset management operations
We are convinced that only institutions that surmount these challenges will have the opportunity to realize better business results. In a worst case scenario, ignoring these challenges will surely be devastating for several financial institutions.
The objective of our associated whitepaper is to highlight these hot challenges, point out opportunities, and inform about the major hurdles that financial institutions need to overcome in the near future.
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