Banks See Sustainable Finance, Operational Resilience as Regulatory Priorities

Sustainable finance, operational resilience and digitization are the top three regulatory topics financial services senior executives say they expect their boards and executive committees to spend the most time on in 2022, according to Deloitte’s Financial Markets Regulatory Outlook released today. The report surveyed 93 senior executives and non-executives at financial services firms.

The report noted that executives expect “marked increase” in attention paid to transitioning toward a more sustainable economy, and that “policymakers and regulatory will increasingly look at regulatory options to incentivize and/or facilitate the transition,” including through climate-related and ESG disclosures. Seventy percent of respondents from the banking sector said that their firms had made net zero commitments.
Turning to operational resilience, banking executives expect their biggest challenge to be addressing third-party vulnerabilities. The report recommended that firms update their third-party risk management frameworks, enhance third-party risk management systems and seeking efficiencies by standardizing their approach to compliance.

Looking further ahead, the report flagged several “regulatory drivers” that are likely to influence regulatory and policy decisions. These include digitization and innovation, consumer protection, market integrity and a level playing field. “In many cases consumer protection regulators are bringing new unregulated products into scope where they feel consumers are at risk of being harmed, while the need to ensure the integrity of markets and that firms of all types compete on a level playing field are also driving regulators to look at changing the scope of regulation,” the report said.