By Volker Lainer, vice president of product management at GoldenSource

We’ve seen it all before. It’s January, and a lucrative time to be a personal trainer. Offices are filled with chatter about predictable annual health kicks but we all know that things will have died down again come spring. The key is to approach self-improvement with a long-term view by establishing positive habits. And this is exactly the attitude financial firms need to take when looking at their compliance. All too often, it ends in a chaotic rush as the deadline months approach, which is not a healthy way of operating.

Globally, 2020 will see compliance teams grapple with new requirements across numerous jurisdictions. In order to make regulatory reporting efforts effective, data access is crucial. It’s the financial equivalent of a balanced diet. It’s all well and good doing exercise, but if you don’t have the right nutrition in your system, your progress will be limited.

So, what lies ahead? The drivers behind this year’s regulatory landscape will be much the same as they have been since the financial crisis, focusing on creating transparency. In particular, market risk regulations will step into the limelight, with September bringing the new framework for Basel 239, which aims to improve data aggregation and internal risk reporting, and FRTB’s new reserve capital requirements coming into play by the end of the year.

In Europe, 2020 marks two years since Mifid II and GDPR were introduced. With these and other major hurdles, such as EMIR and Solvency II, behind them, compliance teams may be feeling in good shape. But, there is still lots to come. SFTR, which will be fully implemented as of April, introduces new reporting requirements for securities financing whereby firms need to establish legal entity identifiers (LEIs) to adhere to counterparty verification standards. However, global firms aren’t ready for this – as proved by ESMA’s last minute extension of requirements for non-EU countries until 2021 to avoid disrupting liquidity.

Then there’s September’s CSDR. This requires firms to buy-in to trades in an effort to improve trade settlement. It has been tipped to cause disruption because, as it stands, major players deal with thousands of trade failures every day. Not only could this drive up the cost of trading, but compliance teams have to buffer the operational side of things by holistically tracking buy-in costs and penalties.

Additionally, Brexit is an area for compliance teams to keep a close eye on. It’s not yet clear where the next phase of negations will take regulatory alignment, but the UK is likely to push for divergence from the EU in some form.

In the US, regulators are introducing similar reforms and it’s looking like a busy start to the year. In March, banks and credit institutions will need to add credit loss standards to regulatory reports under CECL, and smaller funds have to be fully compliant with N-PORT reporting. Shortly after, FINRA’s CAT file submission’s go-live date is April for equities and May for options.

Looking Eastwards, the regulatory environment becomes even more complex. There are no central regulating bodies in Asia and, as such, Asian countries are still catching up with equivalent standards and regulations. If you think it’s tricky to cope with the US and EU regulations, there are over 40 regulatory schemes in APAC that internationally operating firms have to take into account.  

Interestingly, Asian countries are orientating themselves closer to China’s rules as opposed to its Western equivalents, a trend that’s likely to continue as China’s markets continue to open. It’s a long time until there’s anything close to resembling uniformity in the region, but there is talk of China becoming more aligned to EU rules as it seeks to take a greater role in international finance, which would help make global compliance more uniform.

Nobody knows what this coming decade holds, but it’s increasingly clear that new year’s compliance shouldn’t be a short-term focus. It’s a marathon, not a sprint. Firms need to think more broadly, recognising the roots and commonalities of the challenges they face. In an ever-more complex environment, firms that have a holistic platform to scale all their data needs will be best placed to get to full compliance fitness.