Connect with us

Technology

EMIR: CLOUDS ON THE HORIZON?

Published

on

Haydn Lightfoot

By Haydn Lightfoot, works for financial markets consultancy Crossbridge

February’s European Market Infrastructure Regulation (EMIR) trade reporting go-live highlighted the challenge of updating the derivatives market infrastructure to improve stability.  Complex issues continue to arise, from client engagement to managing the web of inferred obligations behind the regulation.  Attention is also turning to what comes next and whether it is time to re-evaluate traditional approaches to implementing regulatory change.

In this article, we explore five issues with EMIR that we believe require careful management by banks as implementation continues.

Exiting clients? Beware of back reporting

Haydn Lightfoot

Haydn Lightfoot

EMIR requires ‘back reporting’ of historical trades since August 2012, for both current and ‘exited’ clients, each with a Unique Trade Identifier (UTI) agreed with the trade counterparty.  February’s reporting go-live demonstrated the challenge of implementing UTIs with current clients.  Banks reviewing client relationships may want to consider the additional difficulty, and potential costs, of agreeing UTIs with exited clients.

Are segregated accounts worth the cost?

The EMIR requirement for banks acting as clearing members to offer individual client account segregation may too have cost implications.  Currently a premium service for high value Prime Brokerage clients, opening it up is likely to attract increased costs, as banks consider major overhauls to settlement systems, and additional client specific accounts and Standard Settlement Instructions with custodians and depositories.

Firms are likely to seek to pass the costs of such a fundamental shift in market infrastructure and operations to clients, but will they be in a position to calculate the associated costs and fees at the right level?

Navigating the matrix of inferred obligations

Behind these issues lies the recurring theme of complexity.  Today’s regulatory environment implies complex, ‘matrix’ style conclusions and a web of inferred obligations across market participants and jurisdictions.  For EMIR, this interdependency creates challenges, from effective client engagement to achieving cross industry consistency.

Differing client interpretation of obligations

Client engagement is essential for banks to comply with EMIR, however the fragmented approach to client education has led to confusion and differing interpretations of requirements.  In some cases, clients are unwilling to come on-board, particularly those outside Financial Conduct Authority supervision.

A lack of client understanding and engagement with the UTI and Legal Entity Identifier (LEI) reporting requirements is in part the cause of the high volumes of unmatched trades since February’s reporting go-live.  Clearer guidance from supervisors has been called for, to avoid similar issues as other requirements come into force later this year.

Cross industry co-ordination challenge

As banks grapple with these complex implementation issues, cross industry working groups have proliferated.  This in itself creates a challenge for banks to capture and share information from the various forums.

Timely resolution of the common issues identified by these groups is hampered by the backlog of questions sitting with the European Securities and Markets Authority (ESMA).  ESMA issued its latest question and answers on trade reporting a few days before the go-live. Whilst the guidance was welcomed, earlier guidance may have avoided confusion in time to improve go-live outcomes.

Non-compliance timeline unclear

Further uncertainty is added by the lack of clarity around when regulators will start to penalise firms for non-compliance.  The FCA appears to be giving firms some time to address issues with trade reporting before penalising them, however the hardening of regulatory guidance on timeliness of confirmations would counsel caution.  Regulators moved from an initial position of timely sending of confirmations evidencing compliance, to client affirmations being required, as confirmation-match percentages were not considered sufficiently high.

Judging your course

Unpicking EMIR’s web of interdependencies and short timeframes may result in firms making unilateral judgements on where ‘good enough’ lies, particularly where they deem the impact of delays to implementation, or risk of penalties, too high.  Clearly documenting the assumptions and rationale behind such unilateral decisions should help justify them, should they later come under scrutiny.

A challenge for regulators?

Such inconsistencies between firms could pose a challenge to achieving the market transparency and standardisation desired by regulators, without time-consuming and costly retrospective action.  This is demonstrated by the volume of remediation work underway following February’s trade reporting go-live.

Greater central guidance and co-ordination would undoubtedly help, particularly given the short timescales for implementation.  Whilst issues with trade reporting have added to clamours for guidance, given regulators themselves are facing resource and time pressures, it seems unlikely much more direction will be forthcoming.

MiFIR and beyond

Nor does the challenge end with EMIR.  Other regulation on the horizon will significantly impact market infrastructure: the Markets in Financial Investments Regulation (MiFIR) introduces new reporting obligations that aim to ‘marry’ EMIR obligations with existing Markets in Financial Instruments Directive (MiFID) obligations; the ESMA common European transaction reporting requirements may lead to further changes in the way firms report to competent authorities, including interfacing to new reference data standards.

Impacting change prioritisation

The mandatory nature of these, and other, regulatory changes will continue to exert significant influence on project prioritisation.  Change resources are diverted from other strategic projects that either promote efficiency or facilitate revenue generation.

Furthermore, the tight, and parallel, deadlines of many regulatory changes may force some organisations to implement tactical technology solutions to achieve timely compliance.  These solutions, in turn, increase architectural complexity, requiring greater resource and leadership commitment to implement longer term strategic solutions.

In conclusion

MiFIR, and EMIR are only two of the many complex and shifting regulatory changes impacting banks today.  The age of being able to take a draft regulation and quickly construct ‘business requirements’ in the traditional waterfall framework no longer fits the demands of wholesale regulatory change.  Banks now have to be ‘agile and risk-based’.  Moving forward from Basel II, MiFID, Dodd Frank and now EMIR, the regulatory environment will only become more complex and tightly controlled.  Is the time right to learn from our experiences and change our approaches for MiFIR and beyond?

 

 

Technology

81% of Business Managers in the Manufacturing Industry Agree that a Modern IT infrastructure Accelerates Innovation, Creativity, and Productivity

Published

on

81% of Business Managers in the Manufacturing Industry Agree that a Modern IT infrastructure Accelerates Innovation, Creativity, and Productivity 1
  • 83% of business decision makers are convinced that slow running networks and applications are inhibiting these three success factors
  • 78% of IT decision makers believe that innovation, creativity, and productivity of the employees is being limited by the technology in their companies, and 94% within this say it is costing their company money

  • 86% of business decision makers in the manufacturing industry believe that digital performance is critical for business growth

LONDON, 22nd September, 2020 – Riverbed® today launched its expanded ‘Rethink Possible: Visibility and Network Performance – The Pillars of Business Success’ Study, focused on the manufacturing industry, a critical sector for Germany. The study revealed that 81% of business decision makers in manufacturing companies are convinced that IT infrastructure plays a crucial role in enabling their organisations to be innovative, creative, and productive. And, when limited, IT infrastructure inhibits these three success factors enormously (83%). 

The Study – which lays out the indisputable link that business and IT decision makers see between strong IT infrastructure and the manufacturing industry – further revealed that 40% of business decision makers in the manufacturing sector consider IT investment to be the most important business objective at present. And that a further 35% of business decision makers in the manufacturing industry prioritise digital transformation. This means that IT expansion in manufacturing is currently more important than traditional corporate operations such as financial rationalisation. Almost two-fifths of the business decision makers (39%) stated that they had pushed digitalisation in their companies to the greatest possible extent, whilst 52% are still in the process of implementing it. 

The vast majority IT decision makers in the manufacturing industry (93%) say that a well-functioning infrastructure plays an even greater role in creativity, innovation and productivity than it does for business decision makers. At the same time, 94% of IT managers say that limitations of these three factors costs organisations a lot of money.

Other key findings from the Rethink Possible: Visibility and Network Performance Study include:

  • IT and business leaders agree that digital performance is crucial for business growth (86%) and staff retention (80%)

  • 88% of IT decision makers reveal that employee satisfaction falls considerably when systems are slow

  • More than two-thirds of IT decision makers (68%) consider network transparency in their companies to be sufficient

  • The majority of IT managers (82%) would, however, like to see more investment in network transparency

  • And finally, at least six in every ten IT decision makers (63%) acknowledge that there’s a lot of catching up to do in preparing management for the challenges of digitisation.

“The Study shows that the majority of the manufacturing industry recognises the importance of having an efficient IT infrastructure. In the coming months and years, as manufacturing returns to a ‘new normal’ way of working, companies will have to invest even more in technology to fully implement digital transformation,” comments Colette Kitterhing, Senior Director UK&I at Riverbed Technology. With remote working expected to continue and an overall shift towards a more distributed workforce as a result of the pandemic, the performance of corporate networks is also becoming increasingly important for those sectors where the focus has so far been on the automation of equipment rather than their IT infrastructure. However, the convergence of manufacturing plants and IT is creating new challenges, and the opportunities offered by digitalisation are being fully exploited. To ensure that networks and applications deliver the necessary performance and work efficiently, the IT team needs complete transparency. This is the only way for employees to be truly innovative, creative and productive in times of digitalisation.”

Rethink Possible: Evolving the Digital Experience

With 86% of IT and business decision makers in the manufacturing industry believe that digital performance is critical for business growth, technology is the enabler in this process. Riverbed’s portfolio of next-generation solutions is giving customers across the globe the visibility, acceleration, optimization and connectivity that maximizes performance and visibility for networks and applications.

Continue Reading

Technology

Sectigo Selected by Baidu to Provide SSL Services for All-New Baidu Trust SSL Certificates  

Published

on

Sectigo Selected by Baidu to Provide SSL Services for All-New Baidu Trust SSL Certificates   2

Sectigo, a leading provider of automated digital identity management and web security solutions, announced that Baidu (NASDAQ: BIDU), a leading Chinese search engine with more than one billion daily page views, has chosen Sectigo to provide the back-end services for the company’s all-new Baidu Trust SSL Certificates. Baidu will offer Sectigo Domain Validated (DV), Organization Validated (OV), and Extended Validation (EV) certificates white-labeled under the Baidu Trust product line, greatly expanding Sectigo’s footprint in Asia.

“Baidu is committed to making the complicated world simpler through technology. This mission includes providing our customers and users with best-practice security technologies and a seamless experience,” said Roy Zhang, Leader of Enterprise Application Ecology Products, Baidu division. “We have chosen Sectigo to supply the infrastructure for the new Baidu Trust SSL Certificates because the global CA is highly trusted and offers a certificate type for every use case, from authenticating small personal websites to large enterprise domains. Our customers can choose from many trust products, ranging from basic DV SSL certificates to more premium EV SSL certificates, based on their individual needs.”

Sectigo has issued more than 100 million certificates worldwide and offers the widest selection of white-label-ready SSL product options available from a leading certificate authority. Baidu’s Trust offering, available today to website owners in China, leverages this legacy of trust to enhance the security assurance for millions of internet users across Eastern Asia.

“Trust is a key component of Sectigo’s brand. We are not only providing trust through our certificates, but also as a proven technology partner with decades of experience,” explained Michael Fowler, President of Partners and Channels at Sectigo. “Asia and China, specifically, are experiencing an unprecedented shift to conducting business and sharing information online. Baidu and Sectigo have proven successful in their industries and collaborated to bring the best SSL security to greater China.”

“Baidu’s choice to use Sectigo for their Baidu Trust SSL certificates underscores the confidence that leading internet brands have in our products and team—and we look forward to a successful partnership serving companies across Asia and China though a shared vision of excellence,” added Fowler.

Continue Reading

Technology

How AI and ML are changing insurance for good

Published

on

How AI and ML are changing insurance for good 3

By Alan O’Loughlin, Director of Analytics and Statistical Modelling, International and John Beal, Senior Vice President of Analytics at LexisNexis® Risk Solutions

The Insurance industry has been dealing with vast volumes of data for years, but analytics, Artificial Intelligence (AI) and Machine Learning (ML) techniques are increasingly being used to help insurance providers make faster data driven decisions.  Given the exponential level of data available today with AI/ML, insurance providers can now efficiently extract new insights into their customer’s needs and create stronger long-term value.

Personalising Insurance Pricing

Starting with how the market calculates premiums, the insurance sector now has access to thousands of data points to help them calculate premiums. Machine learning algorithms expedite the identification of the most predictive attributes driving claims losses – the most recent data points being historical cancellation data and gaps in cover.

This helps insurers become more competitive, match their risks to the most appropriate pricing strategies and write the risks that meet their underwriting appetite. In turn, customers get more personalised quotes based on their unique risk characteristics across any line of business

Achieving a single customer view

Personalisation within any sector works best of course when you really know who you are dealing with. Today, an explosive amount of data is collected, but it is vastly under-utilised as many organisations do not have the expertise to bring data together from different parts of the business to create a single customer view.  Add to this, the amount of mergers and acquisitions in the insurance market over the past few years and the challenge of managing multiple customer databases.  Linking and matching technology using policy history data to find common threads helps overcome this problem to create one consolidated view of the customer. Optimised matching algorithms are also the most accurate and relevant data is reviewed, reducing consumer friction during the quoting process.

Normalisation makes sense of masses of data

In the same vein, as organisations aggregate massive volumes of data, the value of cleansing and normalisation can’t be overlooked. One example, as usage-based insurance develops, whether through aftermarket telematics devices, smartphone apps, connected vehicles, even in the future from smart home data, all that data needs to be gathered, normalised, standardised. That way, any consumer can enjoy an improved shopping experience based on their needs and preferences, no matter the device brand and insurers have consistent quality standards and outcome decisions for all consumers.

Making Vehicle Data work for insurance

Data normalisation is already helping insurance providers understand the presence of Advanced Driver Assistance Systems (ADAS) on a vehicle at the quotation stage.  An ADAS classification system has been created using machine learning to scan millions of lines of car manufacturer vehicle data to logically sequence and classify vehicle safety features and component’s intended operation or purpose.  Extraction and proper classification of this type of data is extremely difficult, time consuming and error prone without the use of AI/ML

Thinking big, starting small in motor claims

At the claims stage in motor insurance, image recognition technology is being used to capture damage or invoices, run a system audit, and if the claim meets the approved criteria, it is automatically paid without human involvement.  This kind of virtual or ‘touchless’ claims handling is speeding up claim settlement times, cutting costs and improving the customer experience.  The ability to quickly analyse years of historical policy and quote history at the consumer level will add an additional level of security prior to a carrier releasing any claim payments.

Alan O’Loughlin

Alan O’Loughlin

Building context through AI and ML

Staying with motor insurance, telematics data can be used much more broadly than originally intended through AI and ML.  From the point of impact through to claim resolution, telematics data can allow insurance providers to get on the front foot at first notification of loss (FNOL), helping to deliver a better consumer experience post-accident, whilst providing invaluable insights regarding the circumstances of the collision.

AI/ML techniques communicate the conditions before, during and after the time of the accident.  Data points like air bag deployment impact sensor activation and g-force metrics can be analysed to understand claim severity and bodily injury potential.  In addition, by combining vehicle build data, carriers can understand the repair cost and potential impact to expensive ADAS features.  Insurance providers can instantly also help their customers with emergency services, vehicle rentals and repairs through instant analysis.

Taking the pain from home insurance applications

Moving into home insurance, we know that conversion rates of people shopping for home insurance is quite low due to a number of hard to answer questions along the customer journey. Rebuild costs is a classic example.  Prefill and data validation solutions are now helping to solve that problem but they are only possible through a huge amount of modelling, linking and AI-ML techniques to pull all the data together to return accurate and up-to-date information on the person and property.

Putting customers in the picture

AI is also at work in the commercial property insurance arena.  It can provide valuable insights regarding a potential location for a new branch or business relocation – footfall, crime rate, exposure to perils or other local circumstances that increase risk. This insight when provided to the customer enables them to take preventative measures if they do go ahead in that location, decreasing risk and loss costs, whilst helping to improve customer experience and retention.

AI and ML can help in the democratisation of data

Finally, AI and ML techniques are helping consumers take advantage of their individual data points which in turn provide the most accurate and updated view data to the insurance providers they choose to interact with on their own schedule.

A good example is the way driving behaviour data from aftermarket devices, or in the future, direct from the connected car gives a clearer picture of someone’s driving risk on the road.  Drivers then benefit from being judged based on their individual behaviours, rather than paying premiums based on average driving habits.

This requires transparency. Each time a consumer applies for insurance they consent to their data being used to provide the insurer with the best information possible, so they can set an appropriate premium based on the risk. Within insurance, we are focusing more than ever on educating consumers about how their data can be used and evaluated in a way they control and understand.  AI and ML automate and process the data consumers are happy to share – supporting greater choice, improved fairness and reduced friction with more personalised insurance protection.

Continue Reading
Editorial & Advertiser disclosureOur website provides you with information, news, press releases, Opinion and advertorials on various financial products and services. This is not to be considered as financial advice and should be considered only for information purposes. We cannot guarantee the accuracy or applicability of any information provided with respect to your individual or personal circumstances. Please seek Professional advice from a qualified professional before making any financial decisions. We link to various third party websites, affiliate sales networks, and may link to our advertising partners websites. Though we are tied up with various advertising and affiliate networks, this does not affect our analysis or opinion. When you view or click on certain links available on our articles, our partners may compensate us for displaying the content to you, or make a purchase or fill a form. This will not incur any additional charges to you. To make things simpler for you to identity or distinguish sponsored articles or links, you may consider all articles or links hosted on our site as a partner endorsed link.

Call For Entries

Global Banking and Finance Review Awards Nominations 2020
2020 Global Banking & Finance Awards now open. Click Here

Latest Articles

What to Know Before You Expand Across Borders 4 What to Know Before You Expand Across Borders 5
Top Stories8 hours ago

What to Know Before You Expand Across Borders

By Sean King, Director of International Tax at McGuire Sponsel The American retail giant, Target Corporation, has a market cap...

81% of Business Managers in the Manufacturing Industry Agree that a Modern IT infrastructure Accelerates Innovation, Creativity, and Productivity 6 81% of Business Managers in the Manufacturing Industry Agree that a Modern IT infrastructure Accelerates Innovation, Creativity, and Productivity 7
Technology8 hours ago

81% of Business Managers in the Manufacturing Industry Agree that a Modern IT infrastructure Accelerates Innovation, Creativity, and Productivity

83% of business decision makers are convinced that slow running networks and applications are inhibiting these three success factors 78%...

From fundamentals to digital evolution: Deutsche Bank and ACT release comprehensive guide for treasurers 8 From fundamentals to digital evolution: Deutsche Bank and ACT release comprehensive guide for treasurers 9
Finance8 hours ago

From fundamentals to digital evolution: Deutsche Bank and ACT release comprehensive guide for treasurers

The Association for Corporate Treasurers (ACT), in partnership with Deutsche Bank, has today announced the release of “The Group Treasurer:...

Sectigo Selected by Baidu to Provide SSL Services for All-New Baidu Trust SSL Certificates   10 Sectigo Selected by Baidu to Provide SSL Services for All-New Baidu Trust SSL Certificates   11
Technology9 hours ago

Sectigo Selected by Baidu to Provide SSL Services for All-New Baidu Trust SSL Certificates  

Sectigo, a leading provider of automated digital identity management and web security solutions, announced that Baidu (NASDAQ: BIDU), a leading Chinese search...

Stella McCartney Transforms Financial Consolidation And Lease Accounting With Board 12 Stella McCartney Transforms Financial Consolidation And Lease Accounting With Board 13
Business9 hours ago

Stella McCartney Transforms Financial Consolidation And Lease Accounting With Board

Board revamps financial analysis, consolidation and reporting for luxury lifestyle brand’s IFRS 16 compliance Board International, the leading provider of...

Satisfaction with Credit Card Issuers in Canada Remains Flat Amid COVID-19, J.D. Power Finds 14 Satisfaction with Credit Card Issuers in Canada Remains Flat Amid COVID-19, J.D. Power Finds 15
Finance1 day ago

Satisfaction with Credit Card Issuers in Canada Remains Flat Amid COVID-19, J.D. Power Finds

Tangerine Bank Ranks Highest in Overall Credit Card Customer Satisfaction for Second Consecutive Year With 73% of credit card customers...

The benefits of automated pension plans 17 The benefits of automated pension plans 18
Investing1 day ago

The benefits of automated pension plans

While many people will prefer to speak to fellow human beings when discussing their investments, automation is already part of...

Pandemic risks eclipse treasury priorities as businesses diversify investments to mitigate impact 19 Pandemic risks eclipse treasury priorities as businesses diversify investments to mitigate impact 20
Top Stories1 day ago

Pandemic risks eclipse treasury priorities as businesses diversify investments to mitigate impact

The Covid-19 pandemic has shunted aside existing challenges to sit atop treasurers’ priority lists, according to “The resilient treasury: Optimising...

Boost for consumers as banks recognise room for improvement on service and delivery 21 Boost for consumers as banks recognise room for improvement on service and delivery 22
Banking1 day ago

Boost for consumers as banks recognise room for improvement on service and delivery

42% of banks are looking to improve service provision and boost customer satisfaction in the year ahead Less than half...

Trading Strategies 23 Trading Strategies 24
Trading1 day ago

Trading Strategies

By Paddy Osborn, Academic Dean, London Academy of Trading Whether you’re negotiating a business deal, playing a sport or trading...

Newsletters with Secrets & Analysis. Subscribe Now