10 Aspects of regulation every corporate board should know
The six years following the global credit crisis have seen a blizzard of financial regulation hit Europe and wider global markets. As the regulatory landscape starts to settle, we consider the regulatory facts of life that can help companies of all sizes negotiate this new terrain successfully.
Gunnar Stangl, head of regulatory coordination, Commerzbank C&M
For the minority of firms whose trading activities qualify them as investment firms, full connectivity will be required between trading, cash management and reporting — bearing in mind that the regulator will expect to see the same levels of risk management and audit that a bank would apply.
The vast majority of corporates that don’t classify as investment firms, but still have significant trading activity, may need to look at upgrading their trading and reporting infrastructure — introducing electronic interfaces, straight-through processing and automation wherever possible. This will help to ensure timely action and full documentation of trades while limiting the burden on a company’s day-to-day activities.
While this may mean yet more paperwork to complete, it may also be an opportunity for a company to review thoroughly its use of financial instruments and consider which instruments are most appropriate for its needs, taking into account structure, risks and costs.
Finally, if a company determines it is out of scope of the derivatives trading regulation, it will still need to invest in compliance and documentation-keeping to be able to demonstrate this out-of-scope status on an ongoing basis.
From FATCA in the US to the draft of a new Anti-Tax avoidance law in Germany, every corporate must be prepared for greater scrutiny regarding their global sources of income, their corporate structure and use of third-country subsidiaries, in addition to existing tax disclosure and anti-money laundering rules. Banks in many cases have to enact and support these initiatives aimed at preventing tax avoidance and anti-money laundering.
At the moment, there are a number of requirements from different regulators, which means that some of these disclosure requirements can be duplicated. Banks are working hard to make ‘Know Your Client’ requirements streamlined and efficient.
This communication is issued by Commerzbank AG and approved in the UK by Commerzbank AG London Branch, authorised by the German Federal Financial Supervisory Authority and the European Central Bank. Commerzbank AG London Branch is authorised and subject to limited regulation by the Financial Conduct Authority and Prudential Regulation Authority.
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