Regulatory oversight has intensified over the past few years for financial institutions around the world, and it’s starting to have an impact on these institutions’ business.
The Basel III framework will require banks to maintain a Tier 1 capital reserve equivalent to 7 percent of the value of their risk-weighted assets, and to maintain liquid assets equivalent to 30 days’ worth of cash outflows. Solvency II places new capital requirements on insurance providers. In the United States, the Dodd-Frank Act requires periodic stress testing for many financial services providers, as well as placing tight restrictions on derivatives trading. At the same time, the European Market Infrastructure Regulation (EMIR) and Markets in Financial Instruments Directive (MiFID) are changing the regulatory landscape for European financial markets.