15 December 2022
In last December’s video, celebrating our first anniversary following our buyout from PwC, I predicted that banks would start to pivot away from regulatory change and compliance to more enterprise-oriented solutions for their Counterparty Contract Data analysis. Reflecting on the predictions we made this time last year about 2022, I’m pleased to say that the overall trend away from tactical compliance projects to a more deliberate approach to counterparty data is clear to see.
The forecast was supported by the assumptions that Covid was relenting, and I imagined that we would enter a period of relative calm with an associated economic recovery but…
2022 has been an eventful year and not all of it good. In the UK we lost a Queen, gained and lost three Prime Ministers, the world gained a new and frightening adversary (Putin), said goodbye to Delta and hello to Omnicrom and stepped back into 1970’s style inflation. A year on and the political outlook seems very different, although popularism seems to have its day, leadership in the West looks weak and in stark relief to our “opponents”, who are increasingly hard-line in their approach to western ideals.
Whilst the accession of Charles III had little impact on our clients many of the other events have accelerated the need for the largest financial institutions to improve the data they hold on their counterparts. In the medium term, the West has had to come to terms with the fact that we are now in a no rules tag wrestling bout with a hungry bear and a very dangerous dragon. The battle for ideas has now become a full-blown economic World War with everyone taking sides, globalisation is under enormous threat and the financial infrastructure is in the front line.
These macro risks will increase the regulatory pressure on the institutions to rethink their needs to better understand counterparty risk, across jurisdictions, products, markets, and counterparts. No longer will it be good enough for banks to outsource their counterparty risk management to an army of expensive lawyers, institutions will and are taking back control so that data, rather than external opinions, will drive decision making in times of crisis.
We have seen six banks make this deliberate move in 2022 and we expect more to join them in 2023. Banks who invested in that counterparty data after the Global Financial Crisis now find that their technologies and operating models are cumbersome and very manual, this means that all the large banks will need to replace their counterparty data services in the next five years, the rush is now on.
