What are the top 10 most significant regulatory changes in the global banking industry this year?

1. Revised Basel III Capital Framework: Introduced by the Basel Committee on Banking Supervision, the revised framework aims to enhance the quality, consistency, and comparability of banks’ capital and liquidity requirements. It includes changes to leverage ratios, risk weights, and the introduction of a standardized approach for credit risk.

2. European Banking Authority’s Stress Test: The European Banking Authority conducted a stress test on major European banks, assessing their resilience to adverse economic scenarios. The test helped identify potential vulnerabilities in the banking sector and improve risk management practices.

3. COVID-19 Regulatory Measures: Numerous regulatory changes were introduced globally in response to the COVID-19 pandemic. These included relaxation of capital buffers, moratoriums on loan repayments, liquidity support programs, and expedited digitalization initiatives.

4. LIBOR Transition: As the London Interbank Offered Rate (LIBOR) is set to be phased out by the end of 2021, regulators globally are pushing for a smooth transition to alternative reference rates. The shift from LIBOR to risk-free rates demanded substantial regulatory changes to ensure fair and efficient transitions.

5. Revised Payment Services Directive (PSD2): The European Union implemented PSD2, aiming to enhance competition, innovation, and security in the payments industry. The directive requires banks to open customer data to third-party providers, encouraging the development of open banking.

6. Anti-Money Laundering (AML) Reforms: Several countries have been strengthening their AML regulations to combat money laundering and terrorist financing. Changes include stricter Know Your Customer (KYC) requirements, increased monitoring, and the adoption of beneficial ownership registers.

7. Sustainable Finance Regulations: Regulators globally are introducing new regulations to promote sustainable finance. This includes requirements for banks to assess and disclose the environmental and social risks associated with their lending activities, as well as measures to encourage investments in green projects.

8. Digitalization and Fintech Regulations: The growth of digital banking and fintech companies has prompted regulators to update their regulations to address new risks and ensure customer protection. These changes range from cyber-risk guidelines to sandbox frameworks for fintech experimentation.

9. Consumer Protection Reforms: Regulators are increasingly focusing on enhancing consumer protection in the banking industry. This involves greater transparency on fees and charges, improvements in complaint handling procedures, and measures aimed at preventing mis-selling and unfair practices.

10. Data Privacy Regulations: With the growing concerns around data privacy, regulators have been strengthening regulations to ensure the secure handling of customer data by banks. The General Data Protection Regulation (GDPR) in Europe and similar measures in other regions have imposed strict requirements on data handling and breach notification.