Banking leaders are facing into a lower growth, high-cost environment where some traditional business models are under threat. There is a focus on growth (whether organic or through consolidation) and transformation initiatives, balance sheet optimisation and operational efficiencies. Initiatives such as the UK government’s Wholesale Financial Markets Digital Strategy and continued support for Open Banking and Open Finance aim to support the adoption of digital technologies. However, this could be a double-edged sword e.g. future wide-scale use of stablecoins and CBDCs could undermine banks’ traditional deposit base.
With continuing geopolitical and macroeconomic uncertainty, prudential regulators are holding firm on the need for robust financial and operational resilience in individual institutions and across the wider financial system. Evolving threats to financial stability from climate and nature-related risks, new technologies and the growing non-bank sector continue to be monitored closely. Concerns about the future of US regulation are driving a more proactive EU approach to supervising global banking entities, to protect the stability of EU markets.
Key elements of the conduct framework – disclosures, value, product governance and financial crime – will continue to require attention. The sophistication of fraud and scams is driving initiatives to raise awareness and improve financial literacy. And the FCA’s Motor Finance Redress Scheme and wider reforms to the UK redress framework may have significant implications down the line.
Political pressure on regulators to support growth and competitiveness have so far mostly delivered measures to support smaller banks and building societies, reduce administrative burdens and streamline regulatory processes e.g. authorisations. Bigger ticket regulatory change, e.g. on ringfencing, is yet to materialise.
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