On 19 January 2017, decision makers in finance and regtech entrepreneurs gathered to discuss the impact of regtech @KPMG_NL in Amstelveen.
The financial services industry is facing rapidly evolving customer preferences, competition from new business models, complex regulations and macroeconomic uncertainty. Risk and compliance functions are directly impacted by these external forces. They are expected to be more real-time and agile while being cost-efficient at the same time. Smart solutions to reduce legal and regulatory costs are required. Proliferation of new technologies may well be the silver bullet that risk and compliance functions of the future need. Are you ready for regtech?
Rens Rozekrans, Partner Regulatory at KPMG, kicked off by stating that regulatory changes are here to stay and urge organizations to adapt themselves. The nagging question is: how? How do current rules and new regulations relate to each other? How can organizations position themselves to embrace future regulation? Regtech presents opportunities to rethink how we approach problems and has the potential to make regulatory compliance monitoring and risk reporting simpler, more flexible and more cost-efficient.
How can regtech contribute to a more efficient regulatory environment? Joost van der Burgt, Policy Advisor International Affairs Banks at the Dutch Central Bank (DNB) clearly sees the benefits of regtech, yet also pinpoints the possibly unintended consequences. What happens in the cloud? How about cyber threats, concentration risk and the magnification of failure (“a small mistake having an impact on a large population”)? Other considerations include: how should Artificial Intelligence be supervised, the challenges of day-to-day supervision or database supervision, and working with supervisors in other countries. Are laws developed 20 years ago still appropriate?
Cheaper (regulatory burden), possibly safer, better data quality, reducing errors and operational risks, compliance by design – regtech is the answer to the increasingly complex and ever-changing regulatory landscape. Joost van der Burgt: “Regtech is also a journey that we will have to make together.” Being a supervisor, DNB has a legal and moral responsibility, yet in some cases it doesn’t have the answers yet.
DNB can help by:
• Providing a regtech-friendly ecosystem: Innovation Hub & Sandbox
• Review of the current regulatory framework
• Provision of data in machine-readable format
• And more
Deutsche Bank, Vanguard, Fidelity Investments, Charles Schwab – Some of the biggest names in banking and asset management have already gathered billions in assets via their robo-advisory efforts. Albert Menkveld, Professor in Financial Economics at Amsterdam Free University (VU): “How did the supervisor react? It said: “The FCA won’t give robo advisors an easy ride and would have the interest of consumers at its heart when assessing new firms looking to enter the market.”
Albert J. Menkveld is professionally fascinated by counterparty risk that could hamper trade and worsen a financial crisis. Can central clearing parties (CCPs) weather a sudden storm? As CCPs have become systemic nodes in the financial network, state-of-the-art risk management has become crucial. The CPMI IOSCO therefore calls for intraday monitoring in central clearing, i.e. high-speed monitoring which can only be performed by robots. Albert Menkveld: ”We will have to do the monitoring of regulation in a robotic way.”
Ramon Vullings, global speaker and author on cross-industry innovation, shared his innovation lessons gained while travelling the ancient Silk Road with his family:
• Disruption often comes from outside your sector
• Ideas are discoveries
• Organisations need a remix strategy
• Do not copy paste, but copy add paste
Ramon Vullings (www.ideakillers.net, www.ideaboosters.net) underlined that ’54% of CXO’s expect competition to come from other industries’. “Someone somewhere has already solved your problem!” He invited the audience to stand up, engage with their neighbours, leave their comfort zone, and invited all to start asking ‘beautiful questions’ such as:
• Why don’t rules have expiry dates?
• Challenge presuppositions
• Higher abstraction levels
• Leave jargon behind
• What if...?
What is the impact of a cognitive supercomputer called IBM Watson being able to read and analyze 1.2 million websites each day? Harry Langevoort, Senior Managing Consultant at IBM Watson, shared how IBM Watson is creating new partnerships between people and computers that enhance, scale and accelerate human expertise. “Cognitive technology processes information more like a human than a computer—by understanding natural language, generating hypotheses based on evidence and learning as it goes. Cognitive systems learn fast and we see a clear advantage in the regulatory space.”
‘85% of CEOs are concerned about having to consider the integration of basic automated business processes…with artificial intelligence and cognitive processes’ (Source: KPMG’s 2016 Global CEO Outlook Study)
During this regtech event, pitches were made by regtech entrepeneurs @online_seminar, @riskrhino (winner of the Audience Award Best Regtech Pitch) and @TaleoReporting. The event was moderated by Carlien Roodink, independent consultant & public speaker, and Edo Roos Lindgreen, Partner Risk Consulting KPMG.
Please contact Rens Rozekrans.