| |August 20198inancial institutions, being the custodians of public wealth, have a great deal of trust associated with them. This trust is gained over time from a combination of an external force that includes strict regulation from central bodies and internal forces like good corporate governance within the institution. In this context, the role of regulation has been steadily moving from policing towards that of guidance. Especially in the following areas:1. Rating Approach: In the last decade, Basel norms recommended banks to move to an `Internal Rating Based' (IRB) approach for credit appraisal from external rating based credit appraisal subject to checks and balances. The rationale was to help banks manage credit risk better by institutionalizing cred-it processes within each bank rather than depend on an external body. Similarly, as the economy and con-sequently the financial sector grows, it is imperative that financial institutions graduate from just compli-ance with watchdog-prescribed norms and put in place technology systems to control risks related to credit, liquidity, market, operations by themselves.2. Focus on Data: The advent of technology-driven approaches to data analysis, i.e. artificial intelligence, machine learning, etc, has increased their dependence on customer data for competitiveness akin to Google or Amazon. Regulation across the world is moving towards capturing both the customer data and mac-roeconomic data in a machine-readable format and making it available in the form of a public registry for increased transparency. For instance, retail banks in the US have access to a public registry of the 100+ variables determining the credit worthiness of bor-rowers, using which they can run their own models for decision making. 3. Open Banking: Banks have traditionally been the most protective of customer information, espe-cially transactional data, fearing customer churn by poaching. However, today the economics of banking has changed, with banks competing with mobile wallets, FinTechs, and retailers, all of whom have FIVE TRENDS IN THE ROLE OF REGULATORS IN BANKING & FINANCIAL SERVICESBy Jaya Vaidhyanathan, President, Bahwan CyberTekEstablished in 1999, Bahwan CyberTek (BCT) is a provider of digital transformation solutions in the areas of Predictive Analytics, Digital Experience and Digital Supply Chain Management. The organization has delivered solutions in 20 countries across North America, the Middle East, Far East, Africa and Asia.Fexpert opinionJaya Vaidhyanathan
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