Suitability, MiFID and cross-border banking represent a large number of rules and regulations that need to be considered when selling financial products and services. ACTICO Rules delivers results from rule-based analysis and handles the decision making.
Banks worldwide have to deal with an increasing number of regulatory
requirements. Many countries have raised the level of customer
protection and have implemented different measures. The European Union
as well, has introduced numerous conditions for the sale of financial
products and the provision of financial services. A few of the most
well-known ones are:
Suitability is an integral part of the investment advisory process
today. Banks have to comply with regulatory requirements such as
MiFID (Markets in Financial Instruments Directive) to coordinate client
wishes regarding products of investments. The requirements are intended
to ensure that products and services are suited to the situation and
requirements of the client. This includes proof that the client's risk
profile and personal preferences have been determined and taken into
consideration. The risk profile takes the client's risk capacity into
account through both an objective consideration of age, assets and
liabilities, and a subjective consideration of investment experience,
aims and risk appetite.
The European Union regulation on key information documents (KIDs) for packaged retail investment and insurance-based products (PRIIPs) requires, for a large number of financial products and clients, that the bank provides the client with the appropriate KID at the appropriate time.
The UCITS (Undertakings for the Collective Investment in Transferable Securities) directive of the European Economic Area requires the provision of key investor information documents (KIIDs).
The Swiss Financial Services Act FIDLEG (Finanzdienstleistungsgesetz) introduced the so called Basic Information Sheets (BIB) as a key information document in Switzerland.
Banks engaging in global, cross-border business face a complex task: Statutory requirements of several countries have to be taken into consideration. The following factors need to be considered: the location of the bank, the locations of the contracting partners, the beneficiaries, and the agents to third countries. Many banks doing cross-border business concentrate on a few core countries with sufficiently high sales volumes. Even in their core markets, they find it impossible to ensure consistent compliance with rules, despite frequent employee training. The loss of sales and inconsistent compliance with regulatory requirements can be avoided with cross-border suitability software. Risk decreases and the capacity to act increases, if predefined rules and/or the bank's own product range change.
Initially, banks typically relied on training and voluminous documents
(country manuals) to ensure compliance in cross-border banking. However, the
multitude of possibilities and the rapid changes to both regulatory
requirements and their own product portfolios hindered consistent and efficient
compliance by these means. The following approach shows a way in which banks
can reduce risks and expenditure:
The application of ACTICO's Cross-Border Suitability Workplace is a basic step: With this standard software, client advisors check the client
constellation against the current set of digitized instructions for all
relevant countries. The appropriate digital instructions (country manuals) can
be obtained and adapted electronically. Decisions taken by client
advisors in customer-related business could be traced later. This reduced the risk
for the client advisor and the bank.
On this basis, the bank can integrate automatic checking into all relevant processes. ACTICO's Central Cross-Border Suitability Engine provides urgently-needed services. Cross-border compliance is progressively and seamlessly integrated into an increasing number of processes until all relevant processes are covered. Every supported process reduces time expenditure for personnel and, with that, costs for the bank.