A perfect storm of challenges, sparked by the fallout of the 2008 global financial crisis and the implementation of new global regulations, is reshaping the landscape of financial services and opening the door for clearinghouses, central securities depositories and other market infrastructures to play a more prominent role in helping firms drive down costs and reduce risks.
Today, the industry stands at a crossroads – or inflection point – that requires financial institutions to fundamentally change how they operate and rethink how to grow profits and ensure greater market stability. New regulatory mandates are driving up the cost and complexity of doing business and creating one of the most challenging return-on-equity (ROE) environments in decades.
Prior to the crisis, the industry had a great deal of excess capacity, capital was cheap, and firms had sufficient revenue-generating operations. In some cases, however, this capacity and capital were misapplied as firms created and funded multiple consortiums in an attempt to gain efficiencies and economies of scale, particularly as it related to the back office processing of financial transactions and data. In the syndicated loan market, for example, efforts by a group of banks several years ago to create a new trading and servicing platform and interconnect it to all the disparate loan data management systems sounded like a win-win. 5-plus years later, however, it has not yet fulfilled its value proposition to the industry.
Download the Congressional Testimony: Regulatory inflection point raises the bar for market infrastructures