The Impact of New Transparency Requirements in Global Capital Markets 

For much of the recent past, it seems that not a day has gone by without negative headlines about some aspect of the global capital markets industry. Whether in the throes of an escalating crisis, on the receiving end of yet another regulatory inquiry, or as the Petri dish for some get-phenomenally-rich scandal, financial companies have been earning a reputation for behaving badly.

Because some of the largest financial players—technically known as “systematically important financial intermediaries” (SIFIs)—are so inextricably intertwined with our modern capitalist culture, and are among the primary conduits for the distribution of government securities (i.e., our growing debt burden), their inherent complexity is difficult, resource-intensive, and risky to change by force of law. Sadly, maintaining the proper functioning of the economy is dependent on many of these large and complex players, regardless of whether the discussion is about the U.S. or another region.

 

This new era we find ourselves in calls for increased transparency, improved oversight, detailed compliance, and other checks and balances. This is a reaction based primarily on violations of the public trust by some of the largest and most visible SIFIs. As these episodes of misbehavior, which range from illegal to highly questionable activities, appear to have increased in frequency, so too have the cries for more oversight. The birth and expansion of the current “age of compliance” can be tied to these violations of the public trust. This is a global phenomenon that clearly has not yet been effectively controlled—and no one knows the full impact of the governance, or unintended consequences of the actions taken thus far.

The road to enhanced transparency and oversight is far from a superficial exercise. It requires fundamental changes to the DNA of these organizations, and to the regulatory apparatus that bears the new burden of reporting data and analytics. To be effective, new reporting methods must deliver the right data to the right person, at the right time, and in the right format. While it is clear that a new level of reporting functionality will be highly dependent upon improvements in technical solutions and data flows, the significant human capital resources it will take to accomplish these changes is often underappreciated.

With rising operational costs, increasingly complex investment opportunities, growth in merger and acquisition activity, and restructuring—and with a long-term trend toward more reliance on temporary or contingent personnel as the backdrop—workforce management needs to deliver effective transparency and oversight that will require specific expertise, vision, and guidance. Read more...