In the financial industry, regulations are created to protect investors and markets while promoting stability. Changes to these regulations can be disruptive as financial institutions need to take the extra time to adjust to the new rules.
The 2008 financial crisis shook the world, and strict regulations were rolled out as a result. Today looks vastly different to back then. A new robust market is upon us, as is a new administration that has begun to scale back some of the pain points financial institutions have been held to after the crisis.
As regulations continue to change, how are financial entities working on adapting to them?
A New Government, A New Set of Rules
The Dodd-Frank Act was enacted in 2010 as a response to the collapse of the financial crisis to improve the safety of the financial system. This instilled government regulation into financial institutions all over while also requiring stress tests for banks to conduct to ensure they could cover their loans. This process was deemed cost-heavy and time–consuming.
Now, President Donald Trump is in office and has begun to scale back these programs. In 2018, he signed into law “The Economic Growth, Regulatory Relief and Consumer Protection Act.” This begins to thaw some of the restrictions placed on banks to operate more freely. The provisions from this new regulatory reduction law hope to keep banks compliant while also reducing costs.
Technology Beginning to Parallel Regulation
As Fintech has changed the financial banking game with products for consumers such as Venmo, a person-to-person money-transfer app, regtech is beginning to gain traction as a tool for the financial industry to capitalize on and make compliance easier.
Regtech combines big data with machine learning and predictive analytics to manage risk. According to Jo Ann Barefoot, “They [Regtech] offer the tantalizing prospect of improving regulatory results and cutting costs, at the same time.” This is a hugely beneficial technology for the financial industry to adopt. The painstaking process of keeping up with compliance just became more accessible.
What’s Data Have to do With It?
A large part of the 2008 crisis was banks not having the data architectures and information technology to support the broad management of financial risks. Now with Regtech, data is used to find solutions in:
- Risk Management
- Data Management
- Know Your Customer (KYC)
Data is everywhere, and everyone wants your data. Data helps financial institutions calculate the next potential crisis, while also helping improve customer service.
The financial services industry will continue to adapt to any new or changing regulation. At US Tech Solutions, we know all about how technological advancements can improve efficiency. Call us today to learn how we can help you.
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