The Deloitte European Centre for Regulatory Strategy has issued its latest annual report predicting the dominant themes in regulation across Europe for 2019.
This year’s report is particularly noteworthy for local firms as it demonstrates how closely the European agenda is aligned with Guernsey’s own regulator’s agenda.
The report, which draws on the expertise of Deloitte’s regulatory experts in London and across Europe, sets out six cross-financial sector themes as well as six sector-specific themes to provide a clear direction of travel for regulation in the coming year.
It is clear to see that, whilst the regulatory framework is still changing in places, the volume of change has now passed and regulators, both overseas and locally, are turning their focus to how financial services businesses are responding to current and future risks.
How regulated businesses manage material risks is now under greater scrutiny. There are limited regulations to guide businesses in their response to matters such as climate change and Brexit, but locally and across Europe regulators are expecting to see businesses identify and manage these, often highly complex, issues.
“A review of the cross-sector themes highlighted in the report gives a good prompt for businesses as they go into 2019,” explains Sally Rochester, who leads Deloitte’s Channel Islands Risk & Regulatory Advisory team. “For example, is your business prepared to manage the risks arising from significant operational disruptions? Are you providing products to clients that represent value for money in its widest sense?”
Some of the themes set out in the report have not yet been explicitly covered by the Guernsey Financial Services Commission (GFSC) but Mrs Rochester advises that it would be sensible for local regulated businesses to get on the front foot and start to consider how they incorporate such issues into their risk management frameworks.
Mrs Rochester says: “Climate change and sustainability is a key theme for 2019 and we have already seen significant activity locally in this area. The Guernsey Green Fund is gathering pace, the GFSC has issued a discussion paper on Green Insurance and our Guernsey Finance Strategy has green finance as one of its central pillars. Local businesses must now not only consider the commercial opportunities in this space but also whether a global shift from high carbon to carbon neutral industry will have an impact on their business strategy, their assets and their customers.”
The report underlines that European regulators will continue to scrutinise businesses’ understanding and management of data risk, culture and corporate governance and cyber vulnerabilities.
“Locally, enough education has been undertaken and time has passed for the regulator to expect that businesses are managing these risks effectively. Such risks no longer sit on the horizon but should be effectively managed and understood by the board, executive and senior managers of every business,” advises Mrs Rochester.
The report also covers sector-specific themes across banking, insurance and investment management ranging from financial crime to fund and product governance. A full copy of the report can be downloaded here: https://bit.ly/2AYEqp9