Insight Report: Regulation in Global Banking

Prior to the economic downturn, financial services companies primarily employed high financial leverage to increase profitability. However, these companies have now been pressured to deleverage and seek alternative sources of profit by the changed economic picture, a rise in regulatory mediation, and competitive issues. In this altered environment, a new operating model is needed, one rooted in attaining the primary relationship – or at least one of the main relationships – with the customer, recreating trust, and forging active customer relationships. However, the global financial institutions continue to face numerous tests to bring stability back in the financial system and win customer trust.

Basel III regulations aim to overcome the shortcomings of the Basel II regime, which failed to effectively address risk exposures in the banking industry. The new regime proposes stricter capital and liquidity requirements for banks to ensure they remain resilient to financial shocks. It has also upgraded internal risk assessment processes and disclosure requirements to bring more transparency in banks’ functioning. However, given the weak condition of banks due to rising regulatory pressures, operating costs and falling profit margins in several key economies such as the US and members of the European Union (EU), the timing of implementation remains uncertain, with migration to minimum capital requirements already delayed until the end of 2018.


• This report provides an overview of the level of regulatory enforcement in the banking industry in various regions.

• It discusses key factors which drive governments and regulatory bodies to formulate and implement regulations.

• It analyzes key operational and technological trends among banking institutions as a result of evolving regulatory dynamics and business environments.

• It discusses the current and future outlook of the retail banking industry and its product classes due to the impact of these regulations

• It outlines the market opportunities and challenges for retail banks due to the changing regulatory landscape

Key Highlights

Basel III is a comprehensive risk-based approach on capital adequacy and risk management for the banking industry, and aims to provide better protection to depositors and minimize firm failures. The project was initiated by the Basel Committee on Banking Supervision as an extension of the Basel II regulations to develop a revised set of capital-requirement and risk-management standards. Basel III is expected to enable banks to hold capital against market, credit and operational risks, and will consist of reform guidelines targeted at improving regulatory supervision and risk management for banks.

In addition to Basel III reforms, regions such as America and Europe are registering significant shifts in their regional regulations. These regulatory changes are mostly in line with Basel III, but address domestic circumstances more effectively. In the US, the Dodd-Frank Wall Street Reform and Consumer Protection Act, and the Credit Card Accountability Responsibility and Disclosure Act, among others, are expected to push banks to pay attention to the quality of their capital, lending practices and consumer protection.

In Europe, which remains in heavy debt after the financial crisis of 2008 and the eurozone crisis, regulators have taken an aggressive stance. The 2013 banking regulations such as Capital Requirements Regulation (CRR) and revised Capital Requirements Directive (CRD 4), combined with the Liikanen proposal to ring-fence retail depositors’ funds, are expected to overhaul the banking industry in the region. On the other hand, the Asia-Pacific, Middle East and African regions show relatively low activity in bringing in new regulations compared to their Western counterparts.

Money laundering, terrorist financing and tax evasion are major ongoing issues faced by the banking industry, leading to various regulatory reforms worldwide. In the US, the Foreign Account Tax Compliance Act (FATCA) was enacted in 2010 to address tax evasion by US citizens via foreign financial institutions and some non-foreign financial entities (NFFEs).

Reasons to buy

• Gain insight on various regulatory developments that have been taken place in different markets to combat rising money-laundering activity.

• Analyze the challenges on the business operations of retail banking institutions due to these regulatory developments.

• Assess the impact of these regulations on the global economy and financial system, and how financial institutions have been taking initiatives to deal with the regulatory changes.

• Understand the impact on products and services, as well as companies' corporate structures, as a result of regulatory developments.

Companies mentioned

Capital One Bank

Discover Bank

American Express

Citibank Indonesia


Bank of America

JPMorgan Chase


Deutsche Bank

Credit Suisse

Royal Bank of Scotland (RBS)



Table of Contents

1 Executive Summary

2 Dynamics of Banking Regulations

2.1 Global Snapshot

2.2 Key Drivers of Changing Regulatory Landscape

3 Analysis of Emerging Banking Regulations

3.1 Global Development – Basel III

3.1.1 Basel III framework

3.1.2 Basel III capital requirement timeline

3.1.3 Comparative assessment of capital requirements under Basel II and Basel III

3.2 Regional Developments in the Americas

3.2.1 The Dodd-Frank Wall Street Reform and Consumer Protection Act, 2010

3.2.2 Credit Card Accountability Responsibility and Disclosure Act (Card Act) of 2009

3.2.3 FATCA and AML Regulations

3.2.4 Developments in Canada and Latin America

3.3 Regional Developments in Europe

3.3.1 Capital Requirements Regulation (CRR) and revised Capital Requirements Directive (CRD 4)

3.3.2 The Liikanen proposal and structural reforms

3.3.3 SEPA cards framework

3.3.4 The Payment Services Directive (PSD)

3.3.5 Financial crimes and tax evasions

3.3.6 Resolution planning and protecting customer assets

3.4 Regional Developments in Asia-Pacific

3.4.1 AML regulations

3.4.2 Financial crimes and tax evasion

3.4.3 Other key developments

3.5 Regional Developments in the Middle East and Africa

4 Emerging Trends and Challenges

4.1 Operational Trends

4.2 Technology Trends

4.3 Key Challenges

5 Impact Assessment on Business and Opportunities

5.1 Impact on Key Business Lines and Corporate Structure

5.1.1 Impact of products and services

5.1.2 Impact on corporate structure

5.2 Operational and Functional Opportunities

5.3 Mergers and Acquisitions

5.3.1 Global banking industry: M&A activity expectations

5.4 Recommended Actions

6 Appendix

6.1 Methodology

6.2 Contact GlobalData

6.3 About GlobalData

6.4 GlobalData’s Services

6.5 Disclaimer

List of Tables

Table 1: Examples of Punitive Actions by Regulators

Table 2: Treatment of New Capital Buffers

Table 3: Key Deductions and Adjustments in Calculation of Tier 1 Capital

Table 4: G-SIFIs Corresponding to their Additional Capital Requirement

Table 5: FATCA Regulations and Impacts

Table 6: US Accounts Held By Financial Institutions and Reporting Guidelines

Table 7: Exempted Offshore Institutions and Products

Table 8: AML Regulations Enacted or Amended in the US, 1970–2004

Table 9: Evolution of AML Regulations in the UK, 1993–2012

Table 10: Documentation Under KYC Process

Table 11: Basel II Implementation in Egypt

Table 12: Global AML Compliance Spending (US$ Million), 2008–2017

Table 13: Global Banking Industry: M&A Activity Expectations (%), 2013–2014

List of Figures

Figure 1: Levels of Regulatory Pressure in Key Regions

Figure 2: Adoption of Basel III in Member Countries

Figure 3: The Basel III Framework

Figure 4: Basel III Timelines for Capital Requirements

Figure 5: Basel II vs. Basel III

Figure 6: Basel III Preparedness in America, March 2013

Figure 7: Completed and In-Process Agreements with Offshore Economies, February 2013

Figure 8: Basel III Preparedness in Europe, March 2013

Figure 9: Basel III Preparedness in Asia-Pacific, March 2013

Figure 10: Impact of AML Regulations on Financial Institutions in Hong Kong

Figure 11: Basel III Preparedness in Middle East and Africa, March 2013

Figure 12: AML Regulatory Developments, 2010–2013

Figure 13: Online Security Device

Figure 14: Expected Capital Charges Under Solvency II for Different Asset Classes

Figure 15: Global AML Compliance Spending (US$ Million), 2008–2017

Figure 16: Regulatory Impact on Key Business Lines and Structure

Figure 17: Transaction Costs for Financial Institutions

Figure 18: M&A and Insurance Firms

Figure 19: Global Banking Industry: M&A Activity Expectations (%), 2013–2014

Figure 20: Key Recommendations


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