Financial Services Market Outlook 2018

2017 Overview

It has been a year of uncertainty with Brexit negotiations, a disastrous general election for Theresa May, whose plan to increase her slim parliamentary majority backfired on her losing her majority. We also saw North Korea testing further nuclear missiles causing unrest across the world and Catalonia’s fight for independence. These were a few of the political events that caused tremors across financial markets.

Preparing for GDPR and MiFID II were and continue to be the main areas of concern moving into 2018, with many who are under prepared for these new regulations.

Retail branch closures grab the headlines reaching over 700 across the big five banks with RBS and Lloyds Bank leading the numbers in closures. Key FCA fines for 2017 were Meryll Lynch for breaches of transaction reporting under EMIR resulting in a £34m fine and Deutsche Bank fined £163m for their lack of controls for AML.

Last but not least, Bitcoin – whether a bubble or not, it has recieved the attention of the banks and the press.

Financial events to come in 2018

The key regulations that come into place:

• IFRS 9 - 1st January
• MiFID II - 3rd January
• GDPR - 25th May
• Final rules for SMCR during 2018

Key areas where financial institutions will be focusing on in 2018 have been identified as the following:

Meeting regulatory deadlines

The key focus will be on ensuring that everything planned in 2017 and implemented in 2018, towards deadlines, will continue to be the biggest headaches for banks and investment management firms. 2018 will be a year for remediation work to prevent future potential heavy fines.

Brexit

It is a year for further uncertainty on both regulation and political development, where firms will continue planning for their exit from the EU. Frankfurt, Paris and Dublin will be the hot areas for firms, this is where they will be relocating and growing their operations.

Who will be moving where:

Frankfurt: Deutsche Bank, Nomura, Morgan Stanley, Goldman Sachs and Standard Chartered

Dublin: JP Morgan, BAML and Barclays

Paris: HSBC

Other institutions are yet to make anything public about their decisions.

Data privacy

After GDPR, ongoing data concerns of record management, the use of personal and customer data will be under scrutiny from regulators who will keep an eagles eye over firms. Subject Access Requests (SAR) will be the largest growing area in 2018 when GDPR comes into place. The regulation has tight deadlines and large amounts of legality around what can be kept back to protect the company and its staff.

Cyber security

With the evolution of technology, every company is not only under threat from financial loss from cyber attacks but they also need to take into account the backlash from reputation damage as well as data breach fines. For 2018, regulators should start to outline and introduce new priorities for cyber security and consolidate what firms need to do to prevent and prepare for cyber threats.

Customer vulnerability

A customer vulnerability paper was completed by the FCA in 2015 and it highlighted many areas where banks need to review their products and services to meet the requirements of vulnerable customers.

The key areas:

• Implementation
• Policy
• Products and Services
• Systems

As a whole the message from head office is not implemented into the front line due to poor communication and training. What a customer should be able to do (the do's and don'ts) is not always advised correctly by front line staff. Policies need to be more flexible and common sense needs to prevail when dealing with vulnerable customers.

Products and services are built and designed for the majority. The closure of branches makes it very difficult for those who need to speak to people in order to communicate with a bank. Currently there are too many phone options that divert back to an automated option.

Systems need to be aligned to each other in order for information to be communicated across the group holding company. For example, products trade under different names and brands but belong to the same group. A customer therefore should only need to inform of bereavement once for every product that the deceased had under that group and not have to be passed from pillar to post, informing the company multiple times.

Open banking

The CMA (Competition and Markets Authority) published a report in 2016 after their investigation, discussing how they wanted a more competitive market between challenger banks and the larger institutions, as they
found a huge amount of customers overpaying for certain products and services.

Their solution would be to build a platform where nine of the largest personal and business current account providers; Allied Irish Bank, Bank of Ireland, Barclays, Danske, HSBC, Lloyds Banking Group, Nationwide, RBS Group and Santander would all share data with each other. This including FinTechs and challenger banks.

According to the above, data will be shared between institutions in a secured and regulated format and used to let the consumer understand areas where they can get a better deal. This will go live aligned with PSD 2 on the 13th January 2018.

What does recruitment look like in 2018?

The key areas for recruitment in the operations, financial crime and compliance markets will be:

MiFID II, where transaction reporting and data analysis will be the growing areas, ensuring their reports are accurate for the FCA. There will also be remediation projects to correct inaccurate reporting.

Conduct risk will grow, especially for areas concerning customer vulnerability, they will work with policy teams as well as technology and change within retail banking.

Court production orders staffing will be required on the back of government enforcing that banks check the illegal immigrants that may have overstayed their visa.

Data privacy will continue to be a highly required skill set through attrition and growing departments to deal with Subject Access Requests rather than outsourcing to consultancies and law firms.

Cyber security will continue to grow as every bank will be under constant threat and attack. This will not only require technical roles but also advisory and operational roles such as incident managers and cyber risk analysts.

Financial crime operations will grow aligned with the open banking era and the growth of FinTech roles. The above are growth areas where there will be a large quantity of attrition roles within compliance, financial crime advisory and assurance.

Salaries and daily rates