RIMES, a provider of managed data services for the buy-side, has published a cautionary forecast, ahead of what the firm believes is set to be the most significant year for regulatory change in the industry in decades.
In 2016, two sizeable EU regulations are likely to come into effect, impacting asset managers and owners across the globe.
According to RIMES, the combination of the Solvency II EU Directive coming into effect on 1st January 2016 and the Financial Benchmarks Regulation, which last week underwent preliminary agreement between the European Parliament and the Council of the EU and is now subject to Parliamentary vote, may create a perfect storm of regulation, that impedes financial institutions’ operations for the short to medium term.
The firm feels that many existing financial data management systems and processes may no longer provide the transparency required by the regulators, leaving asset managers and asset owners obliged to review their current operations.
Despite the regulations being introduced at a European level, Rimes predicts that global asset managers may need to consider operating at the EU standard across the board, to ensure both operational and cost efficiency. It is also likely that the regulatory environments across other regions will soon keep pace with EU directives, making this an even more practical response to the challenge.
Addressing a global audience at the 3rd annual RIMES Data Governance Conference last week, RIMES called on asset managers and asset owners to face up to the challenge ahead and calculate the total economic impact of working with a managed data services provider vs in-house operations. Earlier this year, Forrester independently calculated that using RIMES’ data management services could be lead to as much as USD3.6 million worth of value generated in three years.
Contributors to RIMES' Data Governance Conference also offered their opinions on the impact of the regulatory environment in 2016:
Agathi Pafili, Senior Regulatory Policy Advisor, European Fund and Asset Management Association, (EFAMA), says: “The recent intense regulatory reform at the EU level has brought an important challenge as to its implementation. The new rules take time and effort to be put in place, and it is crucial to first properly implement them, and then carefully evaluate their impact. For the European asset management industry it is crucial to use this implementation process to address overlapping requirements that are either not fully consistent with each other, or which inadvertently create an unlevel playing field among financial sectors. In addition, the European Commission’s plan to build a strong Capital Markets Union is a key challenge for the sector to further support its pivotal role in channelling investors’ capital into the economy.”
Jerry Slason (pictured), Senior Consultant, Investit, says: “In a recent study on behalf of RIMES, we explored the challenges of alternative assets for investment managers. The study exposed the four main challenges: organisation, operation, systems and data. While there is a clear move in the industry towards more simplistic models, enhanced systems and improved data governance, we must be realistic about the scalability, cost and integration challenges this move brings with it for firms in 2016. Our research concluded that firms will only benefit from introducing alternative assets if the operating model is properly planned and implemented.”
