Across the globe, national economies and international markets are in troublesome waters. Inflation is — in some nations — at record-breaking numbers, causing the cost of living to rocket up as well.

However, though worldwide inflation is expected to reach 8.8% in 2022, it is also forecast to drop to 6.5% in 2023 and even lower to 4.1% in 2024 (lower than inflation levels in 2021), according to the International Monetary Fund.

As a result of strong economic headwinds coupled with the increasingly large presence of digital technologies in the banking ecosystem, regulators are focusing more than ever on how to protect consumers while also enabling greater banking resilience through technology.

In this article, we discuss the current state of regulatory compliance in the banking industry, as well as three key considerations for compliance to keep in mind in 2023.

New Banking Regulations Around the World

In 2023, we expect to see major changes to banking regulation around the world, especially as critical deadlines come to pass. For instance, the first day of January 2023 is the final deadline for Basel III implementations. Among many other things, this regulatory change will raise the minimum capital requirements for banks from 2% to 4.5% of common equity.

According to an October 2022 report from Thomson Reuters, roughly 62% of financial service providers expected their compliance budgets to increase in 2022. However, the increasing need for additional resources to carry out compliance activities can challenge even expanded budgets.

Not only are banks around the world scrambling to find ways to ensure their compliance systems are prepared for an onslaught of new regulations in late 2022 and beyond, but they are also struggling to find and onboard talented compliance professionals, as the hiring pool remains ever-competitive.

With all of this in mind, let’s take a look at three key considerations for banking compliance in 2023:

3 Key Considerations for Banking Compliance in 2023

When it comes to preparing for regulatory change in 2023, many banks are turning to digital solutions. While technology certainly offers powerful capabilities for assisting in compliance management, banks need to consider how they will not just implement but also manage and support these technologies.

Here are three key points of focus for banks to prioritize:

1. More Active Regulation of Digital Assets

The year 2023 will undoubtedly witness far greater emphasis on the regulation of digital assets.

Thanks to the growing popularity of blockchain technology, alternative payment methods, and other digital innovation, digital assets have come to stand at the forefront of finance. However, with this increase in public attention also comes an increase in attention from regulators.

According to Deloitte’s 2022 Banking Regulatory Outlook, regulators are working to publish more intensive regulation of digital assets, centered around two main factors:

  1. The regulation of financial instruments (deposits, futures, securities, etc.)
  2. The regulation of entities (banks, broker-dealers, money transmission providers, etc.)

The Deloitte report further remarks on the need for banks to maintain flexibility as more new regulation comes about to ensure their institutions can respond and adapt quickly.

Banking Compliance

2. Increased Need for Automation to Boost Operational Efficiency

As regulators continue to develop more new regulations to impose on the banking industry, compliance systems are becoming increasingly complex in response.

To properly manage the new slew of regulatory requirements headed our way in 2023, banks need to leverage automated technologies to simplify compliance processes.

Deloitte outlines some of the key business benefits of automated technologies, including:

  • Continuous, 24/7 execution of previously manual tasks with minimal human supervision required
  • Redeployment of resources to more value-add tasks
  • Enhanced data quality, documentation, and report accuracy
  • Streamlining of compliance processes thanks to enhancements made to automation bots once new logic on requirements and errors is identified

3. Boosting Resource Efficiency with Resource Augmentation

Resource augmentation offers banks the opportunity to meet the challenge of a limited pool of professional talent head-on.

One of the biggest struggles banks face when it comes to regulatory change is how to use resources efficiently. When a bank utilizes resource augmentation services, not only do they gain access to some of the necessary physical and digital resources but also to the talented experts that come with them.

To keep compliance costs low, leveraging resource augmentation can help banks achieve better scalability and flexibility to meet new regulatory requirements as they appear.

Final Thoughts

Keeping up with regulatory change will be one of the top hurdles for banks to overcome in 2023.

As your institution works to fortify its compliance systems, consider a partnership with CPQi (an Exadel company) to gain the added advantage of technological expertise.

Not only do we provide resource augmentation and digital development services, but we also offer quality implementations of robotic process automation solutions, AI-powered predictive technology, and end-to-end digital banking solutions.

If you want to learn more about CPQi’s custom banking compliance solutions, contact our team today.

Book a Consultation Today