2024 Banking Regulatory Outlook: Navigating Change and Opportunity
As the banking industry enters a new year, regulators have outlined an ambitious agenda for 2024. This includes significant proposed changes to capital, resolution planning, consumer compliance, and supervision, among others. In this article, we will break down the key regulatory developments expected in 2024 and provide guidance on how banks can prepare for the challenges ahead.
Increased Supervisory Scrutiny
Federal banking regulators have signaled that supervisory scrutiny of financial institutions is expected to increase materially in 2024. Larger banks are traditionally targeted, but scrutiny is expanding across the industry. Midsize regional banks should prepare for new regulation, including:
- Liquidity requirements: Regulators will be closely monitoring banks’ liquidity levels and their ability to meet cash needs.
- Debt requirements: Banks will need to ensure they have sufficient debt capacity to meet regulatory requirements.
- Capital requirements: Regulators will be reviewing banks’ capital adequacy and ensuring they have sufficient buffers in place.
Safety and Soundness
The safety and soundness of the banking sector will be at the forefront in 2024. Significant proposals designed to improve it are expected to be finalized, including:
- Basel III international standards: Regulators will be finalizing the implementation of Basel III standards, which will require banks to hold more capital against certain types of assets.
- Long-term debt requirements: Large banking organizations will need to meet new long-term debt requirements.
Consumer Protection
Regulators are expected to emphasize consumer protection in 2024. Banks will need to conduct a thorough evaluation of their technological usage and partnerships to guard against consumer harm. Regulators will be scrutinizing the potential adverse effects of innovative products and services on consumers.
Strategic Regulatory Management
Banks of all sizes will need to devote significant effort to achieve compliance with new regulations and understand their impact on business models and ability to compete. Strategic regulatory management is key, as the pace of potential change stretches to board and senior management’s attention and prompts regulatory change processes to be strategic, not just process-driven.
Preparing for Banking Regulatory Changes in 2024
To prepare for banking regulatory changes in 2024, banks should:
- Analyze emerging trends: Banks should analyze the impact of emerging trends on their business models and operations.
- Proposed and final regulations: Regulators will be releasing new proposed regulations, and banks need to understand the implications for their businesses.
- Legal entity, business, and operational structures: Banks should integrate regulatory considerations into their strategy, keep pace with regulatory changes and enforcement priorities, and anticipate the regulatory impact on their current or future operating model.
Expert Guidance
Deloitte’s Risk & Financial Advisory practice is helping clients navigate these challenges through complex and transformative projects, assisting banking and fintech clients in setting up new entities, enabling M&A activities, and providing strategic regulatory management. The firm has experts with experience in providing clients assistance with regulatory, governance, compliance, risk management, and more.
By understanding the key regulatory developments expected in 2024 and taking proactive steps to prepare for them, banks can mitigate potential risks and capitalize on new opportunities.