Here's how financial institutions remain agile, achieve high sales, and ensure compliance.
An ever increasing amount of regulations has to be integrated into different areas of financial institutions. Therefore, the question arises for Legal Services, Sales, or IT regarding which software technology can help ensure compliance while still making it possible for the company to expeditiously introduce innovations to the market and ensure audit-proof processes and results.
The most important talking points for compliance: FINMA Circular 13/8, MAR, MAD II
The latest compliance topics include the FINMA circular “Market Conduct Rules”, the EU Market Abuse Regulation (MAR), the Market Abuse Directive MAD II, and Fraud and Suitability. It makes no difference what the topic is: the fundamental way of thinking regarding the implementation of regulations is similar: Internal and external data has to be analyzed according to the regulations. This allows decisions to be made. Data analysis therefore outputs a financial institution’s option for action. Case in point: If conspicuous stockbroking by a bank’s customer is ascertained, this might be evidence for market manipulation. If a bank has the ability to detect scenarios such as wash trades, matched orders, cornering, etc., it can react instantaneously and clarify the situation. Due to the variety of scenarios, however, it is not easy to discover market abuse conduct. The challenges is first in defining the rules with which market abuse can be detected, in having the necessary data at hand, and in structuring the workflow.
The most important talking points for sales: Suitability, MiFID
From the relationship manager’s point of view, regulations are to be adhered to in order to ensure suitability. Often questions like these arise: “Which financial products is the relationship manager allowed to offer? Do they match with the investor’s goals, knowledge, and risk profile, therefore making them suitable? Which cross-border regulations are to be considered when, for instance, an investment is made in a foreign market? Are there any internal directives or policies?” Suitability is an integral part of today’s investment consultation processes. Banks have to adhere to regulatory guidelines like MiFID (Markets in Financial Instruments Directive) to coordinate customer wishes with products or investments.
The most important talking point for IT: Which architecture is appropriate?
Financial institutions have the tendency to centrally manage both internal and external regulations. The advantage is that regulations – no matter what business division they concern - are stored centrally in a set of rules. When regulations change, rules can be altered centrally and are instantly available in work processes. The advantages of centralizing regulations become evident if an institution has many or complex rules, if both data and decisions need to be audit-proof, and if changes need to be made frequently.
ACTICO Business Rules Management
With the “Visual Rules for Finance” technology, you can implement a central rule set which can be accessed by different areas of a bank, making the company as a whole more agile. This yields positive effects internally and externally, because processes pick up speed and both liability as well as reputation risk decrease.
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