Complying with a rapidly evolving regulatory landscape can be a challenging task for board members charged with oversight responsibilities. Ever-changing geopolitical conflicts and persistent global economic turmoil are expected to continue to influence supervisory guidance and increase expectations.
Fitch Ratings released its 2024 Outlook: Global Banking Regulation report recently, noting that worldwide, bank supervision may tighten due to increasing concerns about the impact of interest rates on rate-risk-sensitive assets and debt service burdens. This would certainly indicate that financial services companies need to prepare to meet higher risk standards, regulatory expectations, and possible supervisory and enforcement actions.
Key concepts to keep in mind for 2024 are resiliency, model-driven data analysis, accountability, security, privacy and technology integration. How can board members prepare to meet their oversight obligations? We encourage a focus on the following considerations:
- Consumer impact. Expect stringent review of the impact of products and pricing on customers, considered under the umbrella of challenging economic conditions with emphasis on consumer protections, financial institution transparency and fairness.
- Liquidity risk management using stronger metrics like stress testing that considers non-financial risks, such as the ways emerging technologies influence consumer behavior, and provides insight into how to assess and address vulnerabilities to minimize customer disruption.
- Resilient operational frameworks that strengthen out-of-date legacy systems to ensure transparency and accountability, and protect consumers while meeting compliance requirements. Consider investments in IT systems, outsourced solutions and cybersecurity risk management technologies that drive efficiencies, enhance service throughout multiple delivery channels and support timely incident resolution to protect operations and marketplace reputations.
- Preventing fraudulent transactions, particularly bank transfers at the retail level, increasingly the cause of scam payments. Persistent transaction monitoring and detailed analysis may be accomplished with the careful application of AI and other automated workflow solutions.
Looking ahead, we expect regulators will continue to focus on enforcement actions that address these weaknesses in systems, policies and procedures from the dual perspective of consumer protections and management accountability. Board members have an opportunity to make a significant contribution in these areas with informed, strategic decisions that influence processes enterprise wide. For more information, contact your Rehmann advisor or Liz Ziesmer at [email protected] or (616) 975-2855.