A DV E RTOR IAL
The rise of uncertainty
WHAT NEW CONSIDERATIONS DO SECURITIES INDUSTRY PARTICIPANTS NEED TO TAKE INTO ACCOUNT IN
ELABORATING THEIR COMMERCIAL AND OPERATIONAL STRATEGIES?
A
popular question from panel mod-
erators and journalists to people in
positions of corporate responsibility
is: “What keeps you awake at night?” The
honest answer is probably the same things
that keep other people awake at night.
What I’d like to set out here, however, are
some of the recent developments that need
to be considered during waking hours for
their potential impact on strategic deci-
sion-making and, if necessary, put out of
mind before turning in for the night.
In the space available, I’d like to identify
some areas of potential concern – more of
a survey landscape than a list of considered
solutions to anticipated problems.
The first is regulation. While most finan-
cial services firms are resigned to devoting
increasing resources to compliance in the
near- to medium-term, there are a number
of dangers I see that cannot be addressed
simply through extra spend. Reports sug-
gest, for example, that a repeal of at least
part of Dodd Frank is under consideration
in the USA. This leaves firms uncertain
about where to devote the time, money and
effort required to ensure compliance.
Less widely reported is the status of
negotiations between the EU and Swit-
zerland on the status of equivalence in the
regulation of financial services. There is
no dispute over the technical equivalence
of the Swiss regulations; yet recognition
of equivalence has been limited to only
a year. Such an outcome might act as a
warning to those engaged in bringing
Brexit negotiations to a successful out-
come. While the UK may well replicate
many of the EU regulations in an effort to
achieve equivalence, the Swiss experience
suggests that political calculations are not
always predictable.
A second area of uncertainty arises from
political developments. A sharper na-
tionalist sentiment in parts of the EU, for
example, could, if reinforced, complicate
the management of that regional grouping
as evidenced by attitudes to the EU budget.
Friction in an organisation that is used to
moving forward through unanimity in its
Thomas Zeeb, head securities & exchanges, member of the executive board, SIX
key decision-making bodies could lead to
a slowdown in its ability to progress its
engagement with non-EU actors.
At the same time, the much-remarked
shift in global economic power from west to
east will have implications – as yet unclear
– for the global currency and interest rate
environment even without the new banking
crisis and recession which I believe is inevi-
table, if difficult to predict from a timing
perspective. As we discovered in retrospect
from the last crisis, certain levels of debt,
whether sovereign, corporate or personal,
are unsustainable.
The Recovery and Resolution regimes
developed since 2008 could face severe
strain in the event of a new crisis. The
fact that market infrastructures today are
being encouraged by regulators to ensure
that their R&R sy stems work with their
peers and competitors in other jurisdic-
tions suggests a lack of confidence in their
ability to coordinate crisis management at a
regulatory level.
These observations at a macro level
should not mask potential challenges to
individual market ecosystems. Disinterme-
diation by new entrants and attendant risks
from new business models are not fanciful
considerations. At the more extreme end
are unregulated cryptocurrency exchang-
es, but one need not look to the fringes
of financial activity for evidence. Tele-
coms companies, for example, are already
offering accounting services; from there to
banking services is not a big leap.
This is hardly an exhaustive list of issues
we need to consider in strategic scenario
planning, but rather an attempt to identify
certain outlines through the mist. All of
these observations give rise to uncertain-
ties. We need to consider how to respond
to each without the benefit of knowing how
they will play out.
At a time when public trust in established
financial services is less than robust, we
as an industry are facing both a collective
and individual challenge of clearly defining
our USP. Perhaps a good night’s sleep is too
much to ask for after all.
Issue 2
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