In recent years, the financial industry has undergone significant changes with the rise of technology and regulations. Financial intermediaries, which play a critical role in the economy, have been particularly impacted by these changes. In this article, we will examine the changing landscape of financial intermediaries and the challenges they face.
The collapse of Silicon Valley Bank and Signature Bank sent depositors fleeing into the arms of large “Systemically Important Banks,” even as these banks face increased regulation and scrutiny. This trend highlights the importance of financial intermediaries in the economy and the need for effective regulation.
According to Jerome Dilouya, CEO of InterCloud, this culture of increased cooperation will place added scrutiny on financial institutions. Dilouya notes that financial intermediaries must be able to demonstrate their compliance with regulations and their ability to manage risk effective.
The shadow banking system refers to financial intermediaries that fall outside the realm of traditional banking regulations. These intermediaries, which include hedge funds, private equity firms, and money market funds, have grown in size and complexity in recent years. As a result, regulators are increasingly focused on ensuring that these intermediaries are subject to appropriate oversight and regulation.
Top investment considerations for financial intermediaries include recession, private market themes, hedge funds, net zero, products, and new technologies. These considerations reflect the evolving nature of the financial industry and the need for intermediaries to adapt to changing market conditions.
In December 2022, the Securities and Exchange Commission adopted significant amendments to Rule 10b5-1, which provides, under certain circumstances, a defense against insider trading allegations. These amendments are designed to increase transparency and reduce the potential for abuse in the executive trading plans that are subject to Rule 10b5-1.
From Basel's risk-weighted capital requirements to the Dodd-Frank Act and from the Financial Account Standards Board's Current Expected Credit Loss (CECL) standard to the European Union's General Data Protection regulation (GDPR), financial intermediaries face a complex web of regulations that require careful management.
The rise of blockchain technology is bringing about a revolution that will help eliminate some of the limitations of traditional banking. Blockchain technology has the potential to reduce costs, increase transparency, and improve security in financial transactions. However, it also poses significant challenges for financial intermediaries, particularly with regard to regulatory compliance and risk management.
A conference jointly sponsored by the Federal Reserve Bank of New York and the Salomon Center of New York University's Leonard N. Stern School of Business highlighted the key challenges facing financial intermediaries in the coming years. These challenges include regulatory compliance, risk management, and the need to adapt to new technologies and market conditions.
Despite these challenges, financial intermediaries play a critical role in the economy and are likely to continue to do so in the years ahead. As the financial industry evolves, intermediaries will need to adapt to changing market conditions and regulatory requirements in order to remain competitive and effective.
