In an environment of uncertainty driven by unprecedented regulatory change, firms must collaborate on the adoption of standards-based approaches to minimize the total cost of ownership of compliance, SWIFT experts said in a new white paper.
 
The paper, “Facing the unknown: Building a strategy for regulatory compliance in an uncertain landscape.” makes the case that “we are entering a period of great uncertainty.” (The one certainty, it notes, is that there will be more regulation.) The uncertainty is an inevitable consequence of an unprecedented attempt to coordinate an ambitious series of regulatory measures across all major markets—impacting everything from the capital structure of banks to the clearing and reporting of derivatives.”

Clearing, in fact, is one activity set to be particularly affected by new regulation. This implies changes for central counterparties (CCPs). Commenting in the white paper, Diana Chan, CEO of EuroCCP, says: “Regulators want CCPs to clear more, and at the same time, are raising the bar significantly on all aspects of their operation. The cost of compliance with new regulatory requirements will be significant. Collaboration within the clearing industry to develop standards to face these new challenges is more important than ever before. Standardization of message formats, communication protocol, and operational procedures among connected parties reduces long-term costs and operational risks for everyone. The sooner we accomplish this, the better. We must not miss the opportunity to do it right from the start.”

Adopting where possible a collaborative approach to compliance is an important way to take back some control of the situation, the paper argues. Fabian Vandenreydt, head of Securities and Treasury Markets at SWIFT explains: “Presenting to the regulators, alongside your peers, operational solutions that work for both regulators and for you and your fellow institutions is a better way of moving forward than either just waiting for something to be imposed or burying your head in the sand and hoping it will all go away.”

The SWIFT white paper offers guidance on the way forward for financial institutions grappling with regulatory uncertainty. It suggests that firms need to monitor the situation, take a stance on how proactive they will be in shaping the regulation, and make a plan for compliance based on what they do know. It argues that standard, open, flexible solutions are essential to reducing the total cost of ownership of compliance efforts—and that there is an opportunity to develop collaborative solutions to minimize the industry-wide operational impact of regulatory change.

Vandenreydt concludes: “The uncertainty related to upcoming changes in regulation presents a common challenge to the industry as a whole. Only through collaboration will we reduce our costs and SWIFT is ideally placed and ready to help our community tackle this challenge.”

http://www.swift.com/news/press_releases/regulatory_white_paper