Sibos delegates slam “ill-conceived” regulation
Sibos delegates have sent a blunt message to the world’s financial regulators that new regulations are neither well planned nor well implemented, writes Kurt Parry. Eighty per cent of delegates expressed their negative views regarding regulation in yesterday’s regulation plenary session.
Andrew Sheng, President of Fung Global Institute, a Hong Kong-based think tank, found the vote unsurprising. “Of course the regulations weren’t well planned, they were drawn up in a panic,” he told the audience. “
“The regulations need to be fit for purpose and we need to think less about self-interest and more about social interest to build more trust and build a better industry. Financial inclusion is the biggest issue and if we don’t address that, we will have a social revolution on our hands. Only 10 per cent of the Pakistani population have bank accounts, but 70 per cent have mobile phones. With the right infrastructure, they can have access to financial services and banks can foster their trust.”
For May Abulnaga, head of the regulation department at the Central Bank of Egypt, trust between industry institutions is as much of a problem as customer relationships.
“When the crisis hit, we weren’t really that affected in Egypt, we weren’t closely tied with other world banks, but the regulations that have been introduced, and those that are about to be introduced, will be very difficult to implement. They will apply to different banks at different times in different places. It can’t be a straightforward case of imposing regulations across the board.”
Sheng echoed this sentiment: “It makes life more difficult, but you can’t have Basel III for all banks, you should have regulations that suit specific types of banks in individual countries. Across the world, we have to remember that trust is extremely complex to build, but extremely simple to define; you either trust something or you don’t.”
While regulatory bodies may not be the banking industry’s closest friends, they have to work as their closest allies, said Werner Steinmüller, managing director and head of global transaction banking at Deutsche Bank. “Regulators act on behalf of the customers and this relationship is broken,” he said. “We have to change our culture and act in the interest of the client. Short-term profits simply don’t work and we need to make our own changes or we will be over-regulated, which is in nobody’s interest.”
Small and medium sized enterprises were widely seen as the way forward for the panel members, who saw the potential for fostering new trust as well as rebuilding broken bridges.
“SME funding is the future for banks,” said Sheng. “The regulations at the moment are focused very much on safe banking and are not targeted at SMEs, which make up around 80 per cent of the world’s wealth.”
The session ended – as it began – with a vote. This time, when asked whether they felt there was a high risk of another banking crisis, 69 per cent of the delegates said they thought there was. As Stefan Gavell, executive vice-president, global head of regulatory, industry and government affairs, State Street, so aptly put it: “If this is the opinion of financial professionals, I dread to think what the general public think.”
And for Sheng, the vote practically amounted to a warning: “This isn’t just a case of pessimism; this is a message to regulators that they haven’t done their job.”