Htet Tayza looks at new figures to ask whether the global financial services sector is changing its attitude towards regulation.
Global Regulatory Outlook
UK-based corporate finance adviser Duff & Phelps has just released its Global Regulatory Outlook 2016 report. The research questioned 195 financial services professionals, including 98 senior executives, to determine the global sector’s perceptions of regulation and how regulatory developments may impact business in the year ahead.
Writing in the report Julian Korek, managing director of Duff & Phelps, said that “the industry’s opinion on the impact of regulation continues to soften year-on-year.” Here, he’s referring to the fact that the number of executives surveyed who said that regulation has “little or no effect” on stabilising the global financial services sector is falling. He did note, however, that “significant ambivalence remains.”
Over two fifths (42%) did say that they believe regulation has “little or no effect” on the stability of financial services. However, this is a significant drop from three years ago, when 54% of respondents expressed the same opinion. Also, 40% of executives questioned said that regulation would make the international financial services industry more stable – up from 30% who expressed this opinion in 2013. Furthermore, the number of respondents who said regulation would make the sector less stable on the whole fell from 16% in 2013 to 14% in the latest report.
Htet Tayza’s analysis
Traditionally, the financial services market has held a dismissive view of regulation. As an article on financial information portal Investopedia explains: “Many sectors of the business world have long complained about government regulations and their restrictive nature. Often cited as an impediment to corporate and small business profits, and a waste of precious time and effort, government statutory requirements have been denounced, side-stepped and violated by many a business since the early Twentieth Century.”
Yet the financial services sector seems to be softening its attitude towards regulation – why? According to online payment sector publication Pymnts only 6% of executives questioned in the Global Regulatory Outlook 2016 report said that there’s enough regulation in place to prevent another global economic crash. In my opinion, the international economic crash of 2007—2008 changed the nature of the financial services industry forever. Now, industry executives are starting to believe that there must be adequate regulation to limit the sector’s worst excesses, so that the system doesn’t falter again.
It’s interesting to note however, that just 31% of financial services executives questioned in the most recent survey believe regulation would “bolster and support” consumer confidence. This is down from 43% the year before and proves what Korek said about “ambivalence.” The global financial services sector may be somewhat warming to regulation, but they’re hesitant to fully embrace it at the risk of limiting consumer activity, which could damage the industry’s growth prospects.