Financial Institutions Horizons 2024

News

Financial Institutions Horizons 2024

24 January 2024

If you had told me that we would leave 2023 having lost one of Switzerland’s largest banks, and yet also emerge relatively unscathed (at least by 2008 standards), I would have found it hard to believe. Add to this rising interest rates, and last year had the potential to be incredibly tense.

In many ways, it is a testament to the regulation put in place post 2008 that further market disruption was avoided. 2023 was a good reminder of the role of these regulations in maintaining robust, transparent markets, and building resilience.

That said, 2023 has also proved to us that as we address known risks across the financial sector, new risks necessarily emerge. For example, the run on Silicon Valley Bank was like none other seen before, largely down to the speed of communication via social media and the fact that money can now be moved at the touch of a button. 2023 was also the year that we began to address the risks associated with so-called shadow banking, understanding the extent to which we do not have transparency over the flow of capital.

After a sobering year and a half for crypto markets, we have started 2024 with the approval of bitcoin ETFs in the US. Pension funds and retail investors can now buy bitcoin without touching the underlying asset. It is a watershed moment for traditional finance meeting innovation and disruptors. Not only has there been a strong appetite for the bitcoin ETF across the banking world, but it comes alongside a continuing interest in tokenization. While remaining risk adjusted, the opportunities presented by digital assets for driving transparency and efficiency will reshape traditional finance.

The risks and uncertainties in question for the financial sector are not confined to the financial world. ChatGPT and other large language models showed us that development in technology is now exponential, with accompanying risks that few of us can really understand.

As this drives nations to collaborate on regulatory solutions and standards, the geopolitical landscape appears fragmented and fragile. The tragic wars in Ukraine and the Levant are reminders that little is certain, conflict tends to escalate quickly and, most of all, wars are expensive on all fronts. We also prepare ourselves for nearly half of the world’s population heading for general elections this year. Though outcomes for these may appear certain, the knock-on effects of these outcomes are not.

What can we learn from 2023, and how can we prepare as we head into 2024? How can we ensure we have the appropriate risk management and robust governance measures that will enable us to adapt to the changing landscape? Our five themes for FIS Horizons in 2024 look to address this:

Riding the Wave

‘Unprecedented’ is becoming an overused term for the 2020s, with new challenges and uncertainties emerging globally. As we look ahead to another year of ongoing conflict, supply chain disruption, key general elections, and continuing inflationary trends, we look at how the financial sector can adjust and mitigate risks.

Accelerating Change and Innovation: Regulatory Change

Adapting to the evolving landscape requires regulatory frameworks that appropriately address the risks of today. In this chapter, we look at the regulatory developments that are enabling change and innovation, and the divergence or convergence across key jurisdictions.

Digital Transformation

Where strong governance and risk management are impossible without the correct technology in place, new risks also emerge from digitalization. From digital assets to AI, we look at how digital transformation is influencing the laws, rules, and regulation of financial activities.

ESG

2023 was the hottest year on record globally. The role of the financial sector in financing climate action, and the governance and social considerations that go with this, continue to be a key focus for our clients and for us in 2024.

Diversity and Inclusion

Diversity and inclusion is another key topic for us: diversity of thought drives strong governance and helps us avoid ‘group think’; financial inclusion not only drives diversity, but unlocks value across markets. As we navigate the turbulence of 2024, we look at how the financial sector may take action while keeping these two factors in mind.

2024 may well be another testing year. It may also prove, like some of 2023, that we have the ability to adapt, build resilience, and drive change where needed. We hope that you find this edition of 2024 informative and stimulating, and invite you to contact us with any questions or challenges you are facing.

Click here to view Financial Institutions Horizons 2024

Authored by: Sharon Lewis, Charlotte Bonsch, Dr Tim Oliver Brandi, Marcus Busch, Aaron Cutler, Lisa Davey, Julia Dingeldey, Andreas Doser, Andrew Eaton, Claire Ellis, Vincent Fidelle, Robert Gardener, Jason Hitch, Tauhid Ijaz, Melanie Johnson, Emily Julier, George Kiladze, Rachael Koc, Sam Krips, Sebastian Lach, Virginia Montgomery, Paul Mullen, Alex Nicol, Eimear O'Brien, Jennifer O'Connell, Moritz Panten, Ana Patwardhan, Dr Richard Reimer, Dr. Mike Karl Schmidt, Stefan Schrewe, Tomas Schurmann, Jochen Seitz, Nigel Sharman, Dervla Simm, Diana Suciu, Hannah Vero, Susan Whitehead, Bryony Widdup, Isobel Wright, Christina Wu.

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Sharon Lewis

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