Regulators around the world have issued emergency measures to safeguard the economy from the coronavirus fallout. But what can RegTechs learn from it?
If anyone truly expected the Covid-19 crisis to have ended by the summer, they have been sorely disappointed. More than six months after Chinese official in Wuhan first reported dozens of cases of a mysterious flu, the pandemic is still part of most people’s everyday lives. At the time of writing, over half a million people have died from the virus and almost 12 million confirmed cases have been reported. While there are some promising medicinal trials being conducted around the world, no one is expecting the health crisis to be truly over any time soon.
The crisis has presented the RegTech industry with both challenges and opportunities. Just like many other sectors, RegTech ventures have had to adjust to the new normal of remote working. Even though this has forced them to make the readjustments and strengthen their cybersecurity measures as every other business have, the same obstacles have also presented the sector with new opportunities to help customers meet their compliance requirements.
“RegTech solutions made it possible for many firms to not suffer delays meeting regulatory filing requirements and compliance obligations despite office shutdowns,” says Keith Marks, executive director of compliance services at CSS.
A big part of this has been that regulators around the world have taken action to protect the financial markets from imploding because of the pandemic. These measures have included banning short-selling, unveiled measures to give investors more flexibility, delaying reporting deadlines, providing guidance to how to treat credits and insurance customers facing financial issues because of the pandemic, and many other measures.
“During these challenging times, it has been vital that central banks and regulators were able to act quickly to support the financial industry in sustaining operations and rolling out new economic supports while continuing to monitor emerging risks,” Joanne Horgan, chief innovation officer at RegTech company Vizor, tells RegTech Analyst.
There has been no shortage of examples of central banks and regulators amending the regulations to protect the economy – from the Monetary Authority of Singapore and the Australian Prudential Regulation Authority to the Financial Conduct Authority and American regulators. And the RegTech industry also played a key part in this.
“Regulators have shown remarkable resolve and engagement during the Covid-19 crisis and RegTechs can learn from their examples,” says Marc Gilman, general counsel and VP of compliance at Theta Lake, the RegTech company.
He adds, “RegTechs can follow these examples by offering products that align to the needs of their customers in light of drastically changed work environments. In addition, they should keep lines of communication open to ensure they understand evolving requirements from prospects, regulators, and their own internal teams. Finally, being patient, understanding, and flexible are all essential to doing business during this crisis.”
Seemingly, customers have been quick to adapt to the new rules. “Partnering with key regulators across the globe, we’ve seen our customers adapt very well to remote working and the willingness to embrace new technology has increased,” continues Horgan. “We can see that in times of crisis, many regulators and the financial services industry will be re-focusing on their ‘core’. Many new initiatives that seemed important in January are now being delayed until 2021 as the focus shifts to operational resilience and managing key credit and liquidity risks.”
So what can RegTech companies learn from the way regulators responded to the crisis? “The key lessons RegTechs can learn from how regulators have adapted to Covid-19 are [to demonstrate] your own resilience and agility – continue to deliver value, increase engagement and communication, reduce pressure on your customers,” suggests Horgan.
She continues, “Show that you understand the new regulatory challenges Covid-19 is posing for your customers and that you are here to help. Focus on what new regulatory requirements and risks are emerging that didn’t exist before [and remember that opportunities] and funding are still available – but the definition of ‘must have’ for regulatory technology has now changed.”
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