Wolters Kluwer Financial Services

Dodd-Frank, Basel III and Solvency II will Continue to Dominate Global Regulatory Landscape in 2012

Wolters Kluwer Financial Services’ Experts Urge Firms to Proactively Address Risk Management and Regulatory Reporting Requirements for Successful New Year

MINNEAPOLIS – Dec. 6, 2011 – Financial services firms have faced thousands of regulatory changes in the past year, but according to risk and compliance experts at Wolters Kluwer Financial Services, there are three names that will continue to take the spotlight as we move forward into 2012: Dodd-Frank, Basel III and Solvency II.

The U.S. securities and banking industries are monitoring Dodd-Frank as its implementing rules are shaped and they await their effective compliance dates in the coming months. Meanwhile, insurers across the globe remain focused on how Solvency II and its ripple affects will impact European insurers, as well as those in other countries. At the same time, financial organizations that operate in multiple countries must understand how Basel III is being instituted across numerous regulatory jurisdictions.

As firms work to monitor and comply with the large amount of regulatory change and ongoing repercussions of the financial crisis, they are also faced with the challenge of managing compliance and risk holistically across their organizations. Where should they focus their efforts in 2012? Wolters Kluwer Financial Services’ experts, who include former regulators and compliance officers, compliance analysts and lawyers, share their insight:

Global Regulations, Risk Management and Audit

Mike MacDonagh, Enterprise Risk Management Content Strategist
“It doesn’t take super powers to see that new and increasing regulation will continue to have a significant impact on financial services institutions worldwide. As well as the significant new prudential regulations such as Basel III and Solvency II, there are rafts of new conduct of business regulations around anti-bribery and corruption, fraud, tax avoidance and, of course, the wide-ranging Dodd-Frank Act. All of these will keep risk and compliance officers busy but there are other areas that they will need to focus on as well…[more].”

Selwyn Blair-Ford, Global Head of Regulatory Policy
“From a global perspective the most influential regulatory change of 2011 was the introduction of Basel III and the ways each jurisdiction is implementing the different facets. There are also a lot of regulatory developments occurring around the world that are certainly Basel III related, but are not necessarily labelled as such. For example there are liquidity regimes, central counterparty programmes, stress testing initiatives, and regulatory reporting enhancements, many of which are implementing parts of the Basel programme. Basel III and its incarnations will continue to dominate next year…[more].”

Prabhat Gupta, Country Manager - India
“For Indian banks, one of the most significant regulations over the past year has been the introduction of Basel III. The regulation means that the capital required (the equity component in particular) has become much larger. The Reserve Bank of India (RBI) and banks will be estimating the capital requirements under Basel III once the guidelines for implementation are released by December 31, 2011. Another significant development for Indian banks over the last year which will continue into 2012 is the RBI’s directive for banks to build an MIS server to generate returns automatically. Banks have been advised to conduct a self-assessment and furnish the estimated timelines for the project…[more].”

Mike Gowell, Vice President and General Manager – TeamMate Internal Audit
“As financial services firms face stronger and stricter guidance around enterprise risk management practices, internal auditors’ roles are becoming more complex. In 2012, internal auditors will likely face emerging challenges related to data security and the need to keep up with and understand the risks associated with mobile devices and newer technology. Additionally, they will need to stay on top of regulatory compliance issues, including those related to the Foreign Corrupt Practices Act (FCPA) and the impacts of Dodd-Frank. Audit departments must focus on realigning audit plans so they can continue to provide core control assurance over existing elements of their audit universe, while adding coverage of new and emerging risks and issues…[more].”

U.K./European Regulations and Risk Management

Mary Stevens, Manager of Regulatory Content – U.K./Europe
“2011 has been an extremely busy year for all sectors within the U.K. financial services industry. Firms are being attacked with regulatory change from all angles as we have seen the G20, Bank of International Settlements Basel Committee and European Commission all battling to resolve the current economic problems. Additionally, a new draft U.K. Financial Services Bill will potentially see the FSA rebadged as the Financial Conduct Authority (FCA) and two additional new bodies, the Financial Policy Committee (FPC) and the Prudential Regulatory Authority (PRA). Such a significant change will affect all financial services firms within the U.K. as they try to meet the requirements of more than one regulator…[more].”

Hans W. Hüsch, Program Manager – Germany
“Banks have been tightening risk management roles, with new extended regulations of minimum requirements of risk (MaRisk). And there has been a new and stronger approach to fight against fraud, anti-money laundering and terrorism financing. As we move forward into the New Year, one question weighing on financial professionals will be, “How do we gain more confidence within the financial markets?” As we await a consensus on how a soft landing of the Euro system can be achieved, many German banks are concerned about economic recession, the potential need to restructure their businesses, and the strength of their funding strategies…[more].”

U.S. Regulations and Risk Management

Ed Kramer, Executive Vice President of Regulatory Programs
“U.S. banks and mortgage lenders truly are worried about the Dodd-Frank Act’s ramifications as well as an increase in oversight and enforcement efforts not only by their prudential regulators, but also by the newly-formed Consumer Financial Protection Bureau, the departments of Justice and Housing and Urban Development, and the Federal Trade Commission. All of this has left bankers and lenders asking why? As survivors of the recent subprime implosion, many if not most believe that they were not part of the problem and should not have to pay such a heavy price. Regardless, these institutions must recognize that they will have to be part of the solution…[more].”

Ted Dreyer, Senior Attorney
“Many of the new regulatory requirements that will be implemented under the Dodd-Frank Act are expected to be issued in 2012 and will have a significant impact on U.S. bankers as well as mortgage and indirect lenders businesses. One noticeable example is the Consumer Financial Protection Bureau (CFPB) combining the early Truth-in-Lending Act (TILA) and Real Estate Settlement Procedures Act (RESPA) disclosures into one. In addition, a number of other regulatory requirements that are part of Dodd-Frank will affect institutions in 2012. Indexing for inflation of Truth-in-Lending exemptions will begin at the end of 2011. Extensive RESPA and Home Mortgage Disclosure Act (HMDA) changes are required. A requirement to collect data for small business lending is coming as well…[more].”

Kathy Donovan, Senior Compliance Counsel – Insurance
“During the first three quarters of 2011, state legislatures and Congress introduced nearly 11,000 bills affecting U.S. insurers. Additionally, more than 18,580 statutes, regulations and bulletins were newly created, revised or issued during that timeframe. The challenges of managing both the volume of activity and the required process implementation changes can be daunting for insurers. Additionally, the NAIC’s continuing focus on its Solvency Modernization Initiative, and particularly its Own Risk Solvency Assessment (ORSA), is expected to impose additional annual reporting challenges for insurers in the coming years. This, coupled with overall enterprise risk management requirements, impacts insurers’ traditional view of risk and controls…[more].”

David Thetford, Securities Compliance Principal Analyst
“The Securities and Exchange Commission (SEC) has had its hands full implementing and preparing to implement measures of Dodd-Frank, from those affecting asset-based securities through derivatives and corporate governance and disclosure, to oversight of investment advisers and broker-dealers. Two major elements of Dodd-Frank have been the registration of private fund managers and the accompanying move of smaller advisers to state jurisdictions. Since both have compliance dates in 2012, preparations are top of mind for the impacted groups…[more].”

About Wolters Kluwer Financial Services

Wolters Kluwer Financial Services is a comprehensive regulatory compliance and risk management business that helps financial organizations manage operational, compliance and financial risk and reporting, and improve efficiency and effectiveness across their enterprise. The organization’s prominent brands include: FRSGlobal, ARC Logics for Financial Services, PCi, Compliance Resource Network, Bankers Systems, VMP® Mortgage Solutions, AppOne®, GainsKeeper®, Capital Changes, NILS, AuthenticWeb™ and Uniform Forms™. Wolters Kluwer Financial Services supports its global customers with more than 30 offices in 20 countries and is a leading worldwide provider of compliance and risk management solutions for the financial services industry, serving more than 15,000 banking, insurance and securities customers across the globe. Wolters Kluwer Financial Services is part of Wolters Kluwer, a leading global information services and publishing company with annual revenues of (2010) €3.6 billion ($4.7 billion) and approximately 19,000 employees worldwide. Please visit our website for more information.