Insights on increased supervision and enforcement, regulatory democratization and divergence, and the three lines of defense
Regulatory scrutiny and enforcement activities will increase. Examinations and investigations under existing regulations will increase in scope coverage as regulatory “perimeters” expand via established jurisdictional authorities. Divergences and debate on jurisdictional authorities will continue across federal, state, and global regulations and frameworks—exacerbated by social and political divides as well as a heightened value to “regulatory democratization.”
Explore here insights on Scrutiny and Divergence from the KPMG report Ten key regulatory challenges of 2023.
Regulators will continue to apply existing regulations to new products and service areas. This will bring heightened scrutiny to areas of ethics and conduct and consumer and investor protections, and will lead to expanded examinations and increased volumes of regulatory matters tied to business, technology, operations, and risk functions.
Supervision will also be directed to new and evolving areas. Common themes across all regulators include fairness, digitalization, crypto and digital assets, cyber security, climate-related risks, competition, and financial crime (BSA/AML/CFT). Regulations and guidance that supervisors will be reviewing closely include:
Regulators will continue to actively seek consumers’ commentary, complaints, and input in an effort to help direct and defend new/expanded regulations, as well as supervisory and exam focus. Key areas will include:
Approaches to various ongoing and emerging risks diverge across federal, state, and global regulators and standards setters, due in part to social and political pressures and in part to debates on jurisdictional authorities. Such differences are unlikely to abate in the near term and, in some cases, may be aggravated by litigation and/or judicial action. Areas to watch include:
Companies are expected to hold each of their three lines of defense accountable for managing risk. Regulators will:
Supervisory activity will remain fast-paced and dynamic, amid global economic transition and geopolitical developments. It is more important than ever to remain current on regulatory and industry trends, maintain open and constructive regulatory interactions, embed accountability and responsiveness, and keep all stakeholders up to date. We must keep focused on execution of programs and commitments, emerging risks, and escalation of concerns early to demonstrate management awareness and ability to separate out what is significant from the 'noise'.
Managing Director and Global Head of Regulatory Relations Group, Morgan Stanley
☑ Ensure effective current and emerging regulatory tracking and inventory
☑ Dynamic mapping of regulations and regulatory expectations to risk assessments and to risk controls
☑ Development and execution of “regulatory routines”, inclusive of process automation and data analysis for consistency and trends (including for regulatory requests and corporate responses)
☑ Demonstrable enhancements to ethics, compliance and culture/conduct incentives and deterrents
Ten Key Regulatory Challenges of 2023
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