Video: The future of financial regulation

As the banking industry recovers from the global crisis, it’s time for a new narrative on financial regulatory reform, says Peter Sands, Group CEO of Standard Chartered. “The regulatory discussion seems to be stuck in endless debate about what went wrong,” says Sands. In this video, the British banker gives his roadmap for change, but says first banks need to restore their reputation with investors.

Watch the full video above, or read some extracts below. 

On the challenges ahead

People have lost confidence in the banking system in the world, and we’ve got a lot of work to do to restore that confidence because without that, banking doesn’t really work. Change will require innovation, but innovation is often a dirty word in financial services. Bankers, policy makers and regulators across the world, must work together to enable new business models to flourish.

Global banks face three basic challenges. One is rebuilding credibility and trust. We’ve got a lot of work to do to restore that confidence, and part of that is adapting to a totally new regulatory environment. A second challenge is that the world economy is very turbulent, very dynamic and banks have to be able to respond to anticipate and support those changes.

A third challenge is around technology and innovation. Perhaps because of the crisis, the banking industry didn’t innovate as much over the last few years as some other industries. And yet it is fundamentally a digitisable industry, and should be subject to the same kind of transformational power of technology as other similar digitisable industries.

On reshaping global regulation

First the industry needs to work very closely with policy makers, with regulators in rebuilding trust and confidence in the industry. Second, there is a real requirement to ensure the maximum degree of consistency and coordination between regulators across the world. And third, we need to think hard about how to stimulate and support and not get in the way of the right kind of innovation in financial services. Innovation that delivers real benefits to customers and clients.

Too often we think about banking regulation in static terms. A lot of the regulatory discussion seems to be stuck in an endless debate about what went wrong, and what we need to do to stop it happening again. On the other hand, we clearly can’t ignore what happened and we must learn lessons from it. No-one had actually thought through what to do when a bank fails.

On innovation

This is an industry where virtually nothing is physical. Most of what we do can be transformed by technology. A good example of where regulation and innovation can run into each other, is around using mobile technology to reduce the cost of access for the unbanked or for rural populations. There have been some fantastic innovations in Africa and some parts of Asia using mobile technologies in this way.

If you have a very sophisticated technology model, but the rules say that the customer has to turn up to a branch or bring three bits of documentation and so on, you have a challenge in reconciling the two. One has to think through how to achieve the underlying objective of the regulation in a way that doesn’t stop a new business model with obvious benefits from flourishing.

Author: Peter Sands, Group Chief Executive, Standard Chartered, United Kingdom

Image: A clock in Canary Wharf in London December 11, 2013. REUTERS/Russell Boyce