President Donald Trump and Brexit unsurprisingly dominate the conversation among executives surveyed by Duff & Phelps for its 2018 Global Regulatory Outlook survey.
The corporate finance and valuation services firm published its report on professionals’ outlook on global regulatory trends and the impact they may have on the world market this year and beyond, with analysts paying close attention to how Trump and Brexit will impact the financial services industry in particular.
London’s wavering position as the world’s top financial hub caught attention last week: The survey found that while executives have, for the first time since 2013, named London as No. 1, researchers warned that professionals don’t expect the city’s reign to last.
“There is still a lot of hard work ahead for the city if it wants to retain the top position in a post-Brexit climate,” said Julian Korek, head of compliance consulting at Duff & Phelps, according to Business Insider reports. “When it comes to shaping London’s future outside of the EU, decisions taken now will be crucial in laying the groundwork for years to come.”
But they are far from the only factors contributing to relentless regulatory headwinds for the industry, and professionals anticipate an array of changes.
Take a look at some of the highlights of the Global Regulatory Outlook survey below to explore how executives expect regulations to affect the global market, from Brexit to Trump and beyond.
— 21 percent of executives said Brexit has already had a direct impact on compliance programs, according to the survey, with professionals also reporting that additional changes to compliance programs are planned for the next six months. An additional 26 percent said their compliance program alterations will come within the next 18 months.
— 58 percent of professionals said London is the world’s top financial center, but only 29 percent said it will retain that leading position in five years’ time — likely a predicted consequence of Brexit, the report found. Despite this risk, Duff & Phelps noted that trade renegotiations stemming from Brexit may actually introduce new opportunities for global corporates.
— 22 percent said GDPR will be regulators’ top focus this year, though more (29 percent) said officials are likely to focus more on cybersecurity in 2018. Nearly half of survey respondents told researchers they are not confident their firms will be ready to comply with the EU’s General Data Protection Regulation when it comes into effect next month, with the report also highlighting executives’ struggle to prepare for SM&CR (Senior Managers and Certification Regime) and MiFID II (Markets in Financial Instruments Directive) compliance too. Cybersecurity also surpassed KYC (Know Your Customer) and AML (anti-money laundering) in terms of executives’ predictions for regulatory focus this year.
— 95 percent of professionals said regulatory costs will increase this year, and nearly a quarter expect their companies to spend more than 5 percent of annual revenue on compliance efforts by 2023, suggesting regulatory pressures are expected to increase over time. More than a tenth of survey respondents said they plan to spend more than 10 percent of annual turnover by 2023.
— 51 percent expect financial services regulation to lead to market stability, up from 42 percent in 2017’s survey, said Duff & Phelps. But the report noted that leaves 29 percent of professionals saying FinServ regulation won’t lead to greater market stability, and even 10 percent believing it will worsen stability. Only about a third said heightened industry regulations will boost investor confidence. Just 13 percent said past regulations have led to adequate safeguards to prevent another market crash.
— 19 percent of executives want greater harmonization among regulations, calling it the “single most important factor in maintaining an effective regulatory system,” the report found. While most (52 percent) believe regulators are improving their ability to collaborate with peer across borders, less than a third said the effort has led to greater harmonization and consistency in global regulations.