As financial services firms scramble to comply with the onslaught of new regulations, they also have to contend with an absence of leadership among industry bodies tasked with helping create the new rules of the road. Yet the need for strong leadership is becoming more critical and a membership survey by the ISITC trade group reflects this yearning.ISITC, which drives standards in transaction processing and related communications, found through its survey that 96% of members polled—almost 100 broker/dealers, investment managers, custodians and others across North America—want stronger leadership from regulatory and industry groups.
The desire for strong leadership can be traced to the fact the new regulations are top of mind for many of the firms polled. About half, or 44% of survey respondents, say that regulation is having a huge impact on operational risk management. One-third says that regulation is having the greatest impact on reporting and internal procedures for compliance.
Many survey participants, or 71%, think that the industry has gained ground in advancing standards by applying best practices even though they concede that there is room for improvement. Nearly three quarters of those surveyed, or 74%, said the industry has enhanced its infrastructure and processes since the Great Recession.
Overall, when asked if the industry is moving in the right direction as far as growth, transparency and client satisfaction, 46% think it is headed the right way while 18% think otherwise.
In a prepared statement, Jan E. Snitzer, chair of ISITC, is quick to point out that ISITC has many leaders among its membership that donate many hours to bring efficiencies and standards to the financial services industry. (The survey is a prelude to ISITC’s 19th Annual Industry Forum and Vendor Show coming March 17 – 20 at the Renaissance Boston Waterfront Hotel. The event will tackle leadership issues.)
But the problem is not with the many unsung heroes—it’s with those at the top of the independent industry groups.
A participant at this week’s SWIFT Operations Forum Americas conference agrees that strong leadership is definitely needed on the standardization front to end an often chaotic situation, particularly with securities regulation. But don’t look for leaders to come from securities firms. “Industry user-firms are followers—they will do what they’re told,” this person says. “But someone has to be the leader.”
Leadership, the source says, will have to come from highly placed people at groups such as SWIFT, ISITC, the DTCC and Sifma—to name a few—because they can more easily put forward a more unified stance for standards than entrenched user firms. These organizations should take the lead because vendors and user firms that are benefitting from proprietary offerings or off-the-radar businesses such as bilateral, over-the-counter derivatives have too much to lose from standardization, according to this source.
I think it’s obvious that the time is ripe for either an individual or a consortium from the aforementioned groups to come forward and articulate a united vision for the industry. This would be extremely effective when the industry responds to the regulators who wield a great deal of power but often are capricious in the execution of new rules and regulations.
A strong spokesperson or group of leaders could also corral a very fragmented and harried industry and hasten its rocky journey through this unfortunate New Age of Regulation. Then the industry just might be able to return to real innovation and a real recovery.
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