| The news of the Silicon Valley Bank problems and subsequent collapse broke just after we published last month. The ripples of rumour and media speculation led to a major rescue for Credit Suisse with a regulator enforced merger with UBS. For now, it seems as if the markets have calmed but the collapse of SVB was a simple lesson in risk management to avoid the concentration of assets in a single business sector. To complete the rescue regulators broke the deposit guarantee rules by ignoring the usual limits on deposit size and instead guaranteeing 100%. They were quick to point out that this would not apply to all bank collapses but the need to support nascent fintech leaders was recognised in government circles. First Citizen Bank was able to step in and cherry pick the bulk of the loan book in what will probably prove a very profitable deal. It will be a further setback to the availability of venture capital and private equity funding and drive down Fintech valuations to new lows. Credit Suisse was already on the radar after several years of well documented heavy losses on poor risk management in the lending book. The comments of its Saudi shareholder refusing to inject further capital was enough to bring it to its knees. Some 50,000 jobs are probably at risk. Even NatWest has seen significant short selling of its stock as speculators hunt for the weakest link in the domino effect. Our prediction is that they will be disappointed, and a degree of stability will return. The Financial Services and Markets Bill is the biggest shake up of financial services in a generation. It is making its way steadily through the legislative process and has on 23rd March 2023, completed Committee Stage in the House of Lords. Report Stage is yet to be scheduled. Read Chris Holmes full article here. Crypto assets will be included into the regulatory framework for the first time. The much more significant second phase of UK regulation of crypto assets will develop in response to the launch on the 1st. February 2023 of HM Treasury’s consultation on the ‘future financial services regulatory regime for crypto assets’. Regulation is also the lead story on the continent, and we would like to draw your attention to a joint PMi Consult/BCS event hosted at Mazars on April 19th at 6.30pm to discuss the DORA (Digital Operational resilience Act) EU legislation. You can register to attend by following this link. The Digital Operational Resilience Act (DORA) has now been formally adopted by the European Union. This gives EU regulated financial entities (and their third-party IT service providers) until January 2025 to comply. DORA creates a regulatory framework for digital operational resilience, mandating that financial entities and their third-party IT providers are able to demonstrate operational resilience in response to cyber-attacks and other digital disruptions. The legislation will be far reaching and highly prescriptive, meaning that financial institutions will need to think carefully about the changes they need to make both internally and throughout their supply chains, in order to prepare.” Join us for an introduction to what the regulations will mean for EU-regulated financial firms and their IT service providers, and what steps they will need to take to ensure compliance. PMi Consult can support you through these changes. |
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