Regulation for the New Era of Banking Must Balance Innovation with Risk, says Deutsche Bank

Published 

London/Frankfurt – The flourishing data economy, the emergence of FinTech and BigTech firms in the traditional banking space and the growth of the crypto-assets market all promise a new era for the financial industry, bringing new competition, improved client service and innovative financial products. More fundamentally, these trends could also alter incumbent players’ business models and even financial market structure, says Deutsche Bank’s second edition of its white paper, “Regulation driving banking transformation”, which includes contributions from leading experts across the banking, technology and legal industries. Regulations will play a key role in shaping the face of this newly emerging landscape, defining the trajectory of change. 

“The disruption enabled by new technologies continues its decisive march into financial services, whether it be in the shape of new players driving new business models, new products, or increased embrace of the power of Big Data,” says Thomas Nielsen, Head of New Ventures, Corporate Bank, Deutsche Bank. “Navigating and embracing such potentially tectonic shifts is never easy – but existing processes and rules are being challenged by changing consumer behaviours and looking the other way with the hope that this is a fleeting trend is a mistake that financial institutions and regulators cannot afford to make.” 

The first edition of the paper, released in October 2018, outlined the regulatory environment pertaining to the use of artificial intelligence (AI), open application programming interfaces (APIs), cloud and blockchain. 

The latest edition notes that the capabilities of these technologies will not be exploited to their full potential without rich and relevant data sets, nor without clients having sufficient trust to share their data with their service providers. While Open Banking initiatives have helped greater data sharing in the financial industry, they omit from scope data stored with other private companies which could otherwise enrich the analytics and, ultimately, the provision of banking services. 

“As this issue becomes more prominent and important, regulators will likely face demands to lift such barriers – in a manner that ensures the protection of clients’ rights and the security of their data. Getting this right will require a delicate approach, and the creation of a regulatory environment that builds trust in data sharing and usage,” comments Polina Evstifeeva, Head of Regulatory Strategy, New Ventures, Corporate Bank. 

The paper assesses the potentially game-changing implications of BigTech companies, which are advanced in consolidating, analysing and using clients’ data, now turning their attention to financial services. While this drives competition, innovation and improved client services, the very distinct business models employed by BigTechs in financial services (which rely on the “datanetwork-activity loop”) also trigger regulators’ vigilance around potential gaps, particularly when it comes to competition and data protection rules. 

The third transformative trend assessed in the paper is the evolution of the cryptoassets market. Although the volumes of initial coin offerings (ICOs) or payments in crypto-assets still pale in comparison to traditional methods of capital-raising or payments facilitation, forward-thinking regulators have already made their moves to provide much-sought-after regulatory clarity to set the path for the market’s development.

The paper concludes that regulation will play a key role defining the trajectory of change in this emerging landscape.

To read the second edition of ‘Regulation driving bank transformation’, please click here.

Most recent episodes

Audio TMI - ESG: Time to Decide

The pressure to comply with ESG initiatives is being felt by corporates like never before, with ESG-compliance a common concern among treasury departments. TMI talks to Lavinia Bauerochse (Deutsche Bank) about treasury’s ...

11:41

Embedded Finance: A 101 Guide for Treasurers

Our latest TreasuryCast guest, Aman Narain (HSBC) sits down with TMI's Eleanor Hill to consider the ways in which treasury might be impacted by embedded finance. In this podcast, Aman explains the differences between embedded finance and BaaS, shares his hopes for the future in this space, and provides...

12:58

Audio TMI - A Modern, Agile, and Efficient Machine

UniCredit's Raphael Barisaac and Massimo Ortino explain how the fir...

What’s on the Horizon for Short-term Investments?

The treasury community has risen to the ongoing challenge of rising interest rates and inflation, with corporate cash serving as the sought-after safety net. Here, Daniel Farrell (Northern Trust Asset Management) and Karl Adams (ICD) consider how the latest MMF reform proposals affect short-term...

39:27

Transitioning a Corporate from LIBOR to CME Term SOFR

The loans market has predominantly moved to forward looking term rates, and both corporate borrowers and global lenders are increasingly turning to CME Term SOFR as the forward looking risk-free benchmarks to support their activities. Listen to this podcast, featuring Gavin Lee, Marco Bianchi (CME...

37:16

HSBC’s Sibos Spotlight – View from Sibos

TMI's Eleanor Hill invites Neil Atkinson, Nadine Lagarmitte, and Vinay Mendonca (HSBC) to discuss the critical treasury topics and conversations highlighted at this year's Sibos conference in Amsterdam. Amongst a wealth of market insights, our guests consider the most critical developments emerging from...

38:40

ECB’s Targeted TLTRO Tweaks Set to Drain Excess Market Liquidity

Welcome to the latest edition of Liquidity Link Live, your exclusive market analysis provided by Northern Trust Asset Management, one of the world’s largest cash managers. Tune in each month to discover the very latest insights on the UK, Eurozone and US markets. This edition was recorded on the 7th...

05:42

Asian Treasury Trends: Learnings and Opportunities

Former corporate treasury professional, Valerie Heng (Deloitte) joins Eleanor Hill to discuss the hot topic of treasury transformation, alongside other key shifts treasurers should be aware of. In this podcast, Valerie uses her knowledge of the Asian Treasury market to explain how the role of the...

20:27

Collaborative Trade Finance: How to Unlock Liquidity at Speed

Imagine if trade finance applications were fully collaborative and corporates could communicate with every trade participant via an open digital hub.  In this podcast, Vincent Almering (Interfood Holding B.V.) and Enno-Burghard Weitzel (Surecomp) explain to TMI's Ben Poole how collaborative trade...

35:54