- Global regulatory focus has shifted from banking to the entire investment management and funds industry, not just to the largest firms, says KPMG
- At the same time, investment managers have increasing opportunities for growth as policymakers seek to encourage private investment and greater long-term savings.
- KPMG identifies three key areas that firms must prioritize: to be transparent and ensure nothing acts against customers’ interests; to develop good data architecture and data analytics; and to address cyber-risk
MONTE CARLO, 29th June 2015 – Investment managers must successfully navigate an increasingly complex regulatory environment, if they are to capitalize on growth opportunities, according to a new KPMG International report.
The latest report, Navigating opposing forces, reveals that on the one hand, policymakers in many parts of the world are encouraging the investment industry to help drive economic and growth agendas. Yet on the other hand, investment managers are facing greater scrutiny by regulators, who see the increasing size of the industry and the widening range of asset classes and investment strategies as a potential systemic risk.
KPMG believes investment managers can capitalize upon the new opportunities within this paradoxical regulatory environment and has identified three key areas that firms must address:
Julie Patterson, head of regulatory change in investment management, Europe Middle East and Africa at KPMG, explained:
“The industry is a key player in growing economic growth and long-term savings, but needs to do more to reinforce its importance to regulators. For example, the investment industry is an integral player in the Capital Markets Union (CMU), which aims to reinvigorate Europe’s capital markets, increasing cross border flows and reducing reliance on bank financing.”
“To be successful, however, the industry needs to address how it deals with customers, data and cyber-attacks. These tend to be uppermost in regulators’ minds.”
Customers - The number one priority for the industry must be transparency and to act unambiguously in the interests of its customers. Issues of culture, conduct, and conflicts of interest are seen as key areas of focus for regulators around the globe.
Data - Growing data requirements from regulatory initiatives such as the Common Reporting Standard and MiFID II are presenting firms with major data management issues. Firms can master their increasing data needs by building a data architecture strategy to improve operational efficiency. Greater success can be achieved by using the opportunity to establish mature data analytics to help shape answers to business-critical questions.
Cyber – KPMG professionals find that regulators are questioning investment managers and funds about how they are addressing the growing threat of cyber-attack. Attacks can take advantage of complex trading technology and the storage of increasing volumes of data and can quickly cause disruption. Firms must get ahead of these risks.
Tom Brown, global head of investment management at KPMG International, concluded:
“Investment managers are increasingly under the regulatory spotlight. Firms must seize the opportunity to engage positively with regulators.”
“This should be the golden age for the investment management industry. The industry is well-placed to support economic growth and to help drive the real economy. The combined forces of longevity, prosperity and demand for savings solutions are allied with growing demand for market-based finance. This plays to the fundamental purpose of the industry - linking enterprises seeking funds with helping people save and invest for the long-term in an uncertain world”.
The full report can be downloaded here.
Christos V. Vasiliou, Board Member, Head of Advisory, KPMG in Cyprus stated that EMIR came into force on 16th August 2012 introducing requirements aimed at improving the transparency of OTC derivatives markets reducing the risks associated with those markets. In order to achieve this, EMIR requires that all derivatives transactions need to be reported to trade repositories (TRs). Additionally it requires OTC derivatives meeting certain requirements to be subject to clearing obligation and for all OTC derivatives that are not centrally cleared that risk mitigation techniques apply. Implementation of EMIR requirements impacted the financial industry in a very challenging timeframe. Entities reviewed existing derivatives portfolio identifying their scope over EMIR. Due diligence was performed over the various TRs leading to a selection, given derivative portfolio, future trading strategy and cost.
Christos V. Vasiliou, Board Member, Head of Advisory, KPMG Limited, tel. 22209000, email. firstname.lastname@example.org.