The digital imperative - EY - United StatesFILE/... · January2017|THEBANKER|3 4BANKINGON PURPOSE Afteratsunamiofscandals comesthereckoning.Butarefinancial institutionsreadytodosome

January 2017 | THE BANKER | 3

4BANKINGONPURPOSEAfter a tsunami of scandals

comes the reckoning. But are financialinstitutions ready to do somesoul-searching and rethink howthey add value to society? JoyMacknight investigates.

6GETTINGTHEMOSTOUTOFDIGITAL

TRANSFORMATIONBanks are investing vast sums into digitalprogrammes but are not yet reaping thebenefits. We examine where banks arefocusing on in order to create – andcapture – value in digital. JoyMacknight reports.

8HOWTOSURVIVEINTHENEWREGULATORYAGE

The banking industry is facing massivedisruption, not just from the new entrantsin the market but also from regulatorypressures across many jurisdictions,writes Justin Pugsley.

10THEVALUEINFINTECHTo offer real value to

investors, clients and partners, fintechcompanies need to balance opportunity,solution maturity and a sustainablebusiness model, writes Dan Barnes.

12THEMILLENNIALAUDIT

The auditing of financial institutions haschanged little over many decades, but thecombined forces of post-financial crisisregulatory reform and digitisation aretransforming the audit world. HeatherMcKenzie reports.

TheBankerPublished by Financial Times Ltd, Number One Southwark Bridge, London SE1 9HL, United KingdomTel: +44 (0)20 7873 3000. Editorial fax: +44 (0)20 7775 6421 Website: www.thebanker.com

One-year subscription rates: £785* – Full access to TheBanker.com and The Banker magazine. *VATwill be charged if applicable

Editor: Brian Caplen +44 (0)20 7775 6364, [email protected] Editor: Joy Macknight +44 (0)20 7775 6325, [email protected] Editor Emeritus: Stephen Timewell +44 (0)7764617824, [email protected] Editor: Silvia Pavoni +44 (0)20 7775 6366, [email protected] East and Africa Editor: James King +44 (0)20 7873 4131, [email protected] Europe Editor: Stefanie Linhardt +44 (0)20 7873 4325, [email protected] Editor: Stefania Palma +44 (0)20 7873 4820, [email protected] Regulation Editor: Justin Pugsley +44 (0)20 7775 6363, [email protected] Markets and Investment Banking Editor: DanielleMyles +44 (0)20 7775 6545Head of research: Alberto Berardi +44 (0) 20 7873 4866, [email protected] publisher: Adrian Buchanan +44 (0)20 7775 6370, [email protected] Editorial Logistics: Simon Duffy+44 (0)20 7873 3373, [email protected]

Contributing Editors: Contributing Editors: Edward Russell-Walling, Nick Kochan, David Lane, Frances Faulds,Michael Marray, Jane Monahan, Dan Barnes, Joanne Hart, Michael Imeson,James Gavin, Peter Wise, David O’Byrne,Charles Smith, Jules Stewart

Publishing Director:Angus Cushley +44 (0)20 7775 6354, [email protected] & Asia Sales Manager:Adrian Northey +44 207 775 6333, [email protected] Publisher Capital Markets & TransactionBanking: James Newman +44 (0)20 7775 6332, [email protected] and Eastern Europe and CIS: Anton Paul +44 207 775 6355, [email protected] Publisher Latin America:Tanny Ribeiro +351 918 669 188,[email protected] Publisher Middle East & Africa: Luke McGreevy +971 4391 4398, [email protected] Publisher Consultancy and Fintech: Ben Fitch +44 207 775 6391, [email protected]

Production Editor: Richard Gardham +44 (0)20 7775 6367, [email protected] Deputy Production Editor: Andrew Petrie +44 (0)20 7775 3230, [email protected]

Art Editor: Harriet Thorne +44 (0)20 7775 3921, [email protected] of Production: Denise Macklin +44 (0)20 7775 6557, [email protected] Production Manager: Sophie Horton +44 (0)20 7775 4830,[email protected]

Global Operations Director – Magazines: Peter Slaughter +44 (0)20 7873 3267, [email protected] Senior Marketing Manager: Raj Rai +44 (0)20 7775 6340, [email protected] Subscription Agent and Trade: Salima Nezam +44(0) 20 7873 4956, [email protected] Subscription Enquiries/Corporate Access: +44 (0) 20 7873 4240, [email protected] Subscription enquiries and customer services: +44 (0) 20 7873 4240, [email protected]

Printers: Printed by Wyndeham Group in the UKDistribution: Seymour Distribution Limited, 2 East Poultry Avenue, London, EC1A 9PT.Tel: +44 (0)20 7429 4000, Fax: +44 (0)20 7429 4001Reprints are available of any The Banker article, with your company logo and contact details inserted if required (minimum order 100 copies). For details telephone +44 (0)207 873 4816. For one-off copyright licences for reproduction of The Banker articles telephone +44 (0)207 873 4871.Alternatively,for both services email [email protected]

Registered Number: 879531 (England and Wales) ISSN: 0005-5395 © Financial Times 2017.

The Banker is a trademark of Financial Times Limited 2017.“Financial Times”and“FT”are registered trademarks and service marks of the Financial Times Ltd.All rights reserved.No part of this publication may be reproduced or used in any form of advertising without prior permission in writing from theeditor. No responsibility for loss occasioned to any person acting or refraining from acting as a result of material in this publication can be accepted.On any specific matter, reference should be made to an appropriate adviser. Registered office: Number One Southwark Bridge, London SE1 9HL,UK.TheFinancial Times adheres to a self-regulation regime under the FTEditorial Code of Practice: www.ft.com/editorialcode

CONTENTS

THE FUTURE OF FINANCIAL SERVICES | REPORT

The economic equaTion is

noT yeT proven buT iT will

be in The fuTure, as long

as banks look aT The enTire

digiTal chain, and noT jusT

The fronT-end invesTmenT

Yannick Grécourt, page 6

ADDING VALUE

4 | THE BANKER | January 2017

Banks are facing an existential crisis on

two fronts. First, they are still grapplingwith the fall from grace in the eyes of the gen-eral public as a result of the global financialcrisis. The ensuing bank scandals, includingthe misselling of products and price rigging,only strengthened the feeling that banks arenot working in the public’s best interest butare doggedly focused on maximising profitsand shareholder return instead.

Second, traditional banks are contendingwith a wave of nimbler financial technology(fintech) start-ups coming in between thebanks and their customers, offering a slickerexperience and changing expectations ofwhat financial services should look like.

AFRIGHTENINGFUTUREAccording toEY’sGlobal ConsumerBankingSurvey 2016, which polled 55,000 custom-ers across 32 markets, one in three consum-ers believes that there will not be a need fortraditional banks at all in the future. Fourout of 10 customers express both decreaseddependence on their bank and increasedexcitement about what alternative compa-nies can provide. And while less than half(42%) of consumers have used non-bankproviders in the past 12 months, 21% of theremaining are considering doing so.

“Banks are being forced to think harderabout their reason for being,” saysPeter Sands,ex-CEO of Standard Chartered Bank and cur-rent senior fellow ofHarvardKennedy Schoolat Harvard University. “The public is askinghigh-level questions about the value thatbanks add to society and the trade-off betweenprivate gain and public risk. In addition, thereis a more technology-driven micro-ask of thebanks as towhat their purpose is.

“The combination of those two things isa fundamental challenge to the banks, bothin terms of the right to play within societybut also in the ability to have a sustainablebusinessmodel,” he adds.

Anthony Jenkins, ex-group CEO of Bar-clays and currently executive chair of cloudplatform 10x Future Technologies, says:“The financial crisis of 2008 revealed howmany banks were too aggressive, too self-

serving and too focused on the short term,and I am convinced that only companies thatconsider the long-term impact of theiractions on society will be able to build a sus-tainable business. In other words: there canbe no choice between doing well financiallyand behaving responsibly in business.”

“The banking industry needs to return todoing what it is supposed to be doing – serv-ing real people, businesses and the economy– and win back the trust of society one cus-tomer at a time,” says Andy Maguire, groupchief operating officer at HSBC.

REBUILDINGTRUSTToday, many banks are reframing their pur-pose to reflect the new and emergingdemands of society and industry. Phil Hark-ness, global leader for purpose-led transfor-mation at EY, defines purpose as “anaspirational reason forbeing that is groundedin humanity and inspires a call to action”.

He believes that it makes good businesssense to be purposeful. “A purposeful organi-sation’s employees are more engaged, moresatisfied andmore likely to remain committedto the company. The same applies to custom-ers –manywoulddrive across town to supportan organisation whose purpose is worthy,understandable and supportable,” he says.

Kris Pederson, EY’s Americas advisorystrategy and customer leader, adds thatbeing purposeful is of particular interest forthe millennial generation. “If a companyisn’t purposeful, millennials and GenerationZ are more likely [than previous genera-tions] to either move to one that is or starttheir own businesses,” she says.

While many banks have a purpose state-ment, some aremore purposeful than others.For example, Bank of America’s purpose is in“helping to improve financial lives throughthe power of every connection”;Wells Fargo’svision is “to satisfy our customers’ financialneeds and help them succeed financially”;and Morgan Stanley says it believes “capitalcanwork to benefit all of society”.

These encapsulate the broader mandateof contributing to social wellbeing, whereasGoldman Sachs’ aim to “provide superior

BANKINGONPURPOSEAdding valueAfter a tsunami of scandals comes the reckoning. But are financial institutions ready to dosome soul-searching and rethink how they add value to society? Joy Macknight investigates.

REPORT | THE FUTURE OF FINANCIAL SERVICES

PurPose is about why

the bank is here and

its essence for PerhaPs

the next 30 to 50 years

Hugh Harper

ADDING VALUE


return for our shareholders” perhaps reflectsold-school thinking.

ACTIONASWELLASWORDSBut even a well-defined purpose does notguarantee exemplary behaviour, as evi-denced by Wells Fargo’s recent accountsscandal. Organisations must “activate” theirpurpose, argues Michael Giarrusso, partner,financial services advisory, at EY, in order toensure that the culture of the organisationreflects its purpose. “Banks need to demon-strate that they are living these values, notjust paying lip service to them,” he adds.

In order to deliver on purpose, it needs tobe activated in all aspects of the business,including recruitment, products and ser-vices, technology, performance evaluationsystems, customers, suppliers and invest-ments. “Every action a bank takes should beseen through the lens of whether it is further-ing its purpose or not,” says Mr Giarrusso.

It is important to understand the differ-ence between purpose and strategy, accord-ing to Hugh Harper, strategy and operationsleader for Europe, the Middle East, Indiaand Africa financial services at EY. “Whereascorporate strategy looks three to five years inthe future, purpose is about why the bank ishere and its essence for perhaps the next 30to 50 years,” he says.

As many of the people at the top of anorganisation will not be responsible for thedelivery of purpose because of their short ten-ure, it is critical the development of purposeengages and is supported by customers,employees, institutional stakeholders and oth-erswhohave a long-term interest in the organ-isation’s sustainable success, saysMrHarper.

PURPOSE INACTIONMr Jenkins agrees that banks must put pur-poseandvaluesat theheartofall theydo if theyare to drive high performance for their cus-tomers, colleagues, shareholders and society.

“This involves clearly defining purposeand values; changing the systems of theorganisation such as promotion and com-pensation to support the purpose and val-ues; ensuring purpose and values areoperative in decision making; using data tomeasure progress; and, crucially, leadersmodelling the behaviours required,” he says.

BothMsPedersonandMrGiarrusso com-mendcreditunions, suchasCoastCapital Sav-ings and Vancity for their ability to deliver onpurpose. “Focus and passion on their purposepermeates everything they do,” says Ms Peder-son. “They live value, with a different way ofoperating, and that can be seen through thewhole lifecycle of customer engagement.”


“Coast Capital is a ‘for-purpose’ organisa-tion,” says Don Coulter, CEO of Canada’s larg-est credit union based on membership. “Weexist beyond simply wanting to earn profitsand believe we can generate benefits for manystakeholders.” Coast Capital Savings’ purposeis threefold: improve its members’ financialwell-being; excel as an employer of choice;and invest in communities.

“Weengagegenuinely, authenticallyand inaccordancewithourpurpose,” saysMrCoulter.“It is a virtuous cycle: the more successful weare at helping our members, the more mem-bers we attract, the more resources we have toinvest in employees and innovation, and thestronger our communities become.”

In addition to promoting financial liter-acy and wellbeing programmes, Coast Capi-tal sponsored Booster Buddy, a free appdesigned to help young people with mentalhealth issues. Today, more than 100,000 peo-ple have downloaded the app, which providesonline counselling tips in a user-friendly,game-type application. The credit union alsohas joint ventures with local universities tosupport start-ups through the incubationphase to become viable businesses.

INNOVATIVESOLUTIONSVancity, whose purpose is to “redefine wealthin a way that furthers the financial, socialand environmental well-being of our mem-bers and their communities”, also goesbeyond strictly financial services to supportits membership. In May 2015 it partneredwith Immigration Services Society of BC, anon-profit organisation, to help refugees’settle in British Columbia.

Tamara Vrooman, CEO of Vancity, says:“The majority of Vancity’s business used tobe based in traditional financial services, butin 2012 we began shifting to a businessmodel of member-led innovation. Wedevelop innovative solutions working withpartners to meet members’ needs and grow amore resilient economy. All of these areessential to how we activate our own vision.”

The credit union is a member of theGlobal Alliance for Banking on Values, anindependent network of financial institutionsthat focusesonatriple-bottom-lineapproach:people, the planet and profit. Other membersinclude Bank of Palestine, Europe’s TriodosBank and XacBank in Mongolia.

“It’s important to acknowledge thatfinancial institutions do not have a neutral orbenign role in society. They have both thepower and responsibility to allocateresources in ways that not only do no harmbut also create positive outcomes,” saysMs Vrooman.

if a comPany isn’tPurPoseful, millennials

and Generation Z are

more likely [than

Previous Generations]to either move to one

that is or start their own

businesses Kris Pederson

INNOVATION


ments on existing legacy systems where theprocesses are not fully automated or digit-ised. Second, there are still a significantnumber of people who view digital as justone of many banking channels.”

Despite these challenges, Mr Grécourtbelieves there is no alternative to going digital.“The economic equation is not yet proven butit will be in the future, as long as banks look atthe entire digital chain, and not just the front-end investment to improve the customerexperience that has happened so far,” he says.

DEEPRENOVATIONInstead of converting existing processes andproducts to digital, banks should rethinktheir entire offering, as well as the productdelivery system, according to Mr Dab.“Through digitisation it is possible to produceand distribute in an entirely new way,” he says.

Marc Raisière, chief executive of Belfius,a Brussels-based bancassurance firm,advances new ways of engagement. “[Banks]need to engage in a real digital transforma-tion and change their vision with regard tosourcing, fintech and digital players. Thedebate is not so much ‘banks versus fintech’,but how to collaborate, build partnershipsand create win-wins,” he says.

Mr Dab agrees, saying: “The world isopening up through APIs [application pro-gramming interfaces], which allows banksto mix together resources and assets fromdifferent places and combine them in anopen environment.”

Head of client and customer experienceat Barclays, Matt Hammerstein, zeroes in onthe UK Competition and Markets Authori-ty’s “open banking revolution” in the UK, aswell as the second iteration of Europe’s Pay-ment Services Directive and the recent Euro-pean Data Protection Regulation. “Myexpectation is that those three taken togetherwill fundamentally transform the way cus-tomers think about what they want from abank and ultimately the way banks have tothink about how to go to market to servethem,” he says.

The value of digiTal banking is well

undersTood from The cusTomer’s per-specTive, and can be measured in conveni-ence, choice and price. With digitisation,financial services are on tap 24/7 and can beaccessed through multiple channels; cus-tomers expect enhanced and more personal-ised products and services.

However, capturing the value of conveni-ence and choice is proving difficult for banks,particularly with new competitors enteringthe market. While most financial technology(fintech) start-ups typically focus on a nar-row offering, they can offer services for a frac-tion of the price as they do not have to dealwith the same legacy or regulatory issuesincumbent banks face. Across many differentbusiness lines, fintechs are effectively unbun-dling the financial services value chain.

This has created a profit conundrum forbanks, particularly when they are ploughingmillions of dollars into digital transformationprojects at the same time. “There is a risk thatmost of the value will be passed to consumersin the form of better service and greater con-venience but may not translate into addi-tional value and profit for banks,” says DavidDab, head of innovation at ING Belgium.

ABETTEREXPERIENCEDavid Ebstein, head of digital for Europe,the Middle East, India and Africa financialservices at EY, believes that in the futurebanks will be able to capture value fromimproving the customer experience. “Digitalprovides a greater choice of channels andflexibility in relation to where and when cus-tomers can interact with their bank. It canalso reduce costs for the bank because itautomates operations and moves clients toself-service channels, as well as manage risksmore effectively,” he explains.

However, to date the cost-to-incomeratio has not shifted in the banks’ favour.“For now it continues to drive up cost for tworeasons,” says Yannick Grécourt, partner ofstrategy, customer and operations at EY.“First, many banks are rolling out develop-

GETTINGTHEMOSTOUTOFDIGITALTRANSFORMATIONInnovationBanks are investing vast sums into digital programmes but are not yet reaping the benefits.Joy Macknight examines where banks are focusing on in order to create – and capture – value in digital.


The economic equaTion is

noT yeT proven buT iT will

be in The fuTure, as long

as banks look aT The enTire

digiTal chain, and noT jusT

The fronT-end invesTmenT

Yannick Grécourt

INNOVATION


ANEWWAYOFWORKINGFelimy Greene, regional head of customerfranchise at Citibank’s Asia-Pacific andEurope, Middle East and Africa business,also emphasises the capacity of APIs to usherin a new way of working for banks. InNovember, Citi published a set of APIs thatopens up 80% of its banking functionality tothird-party developers. In less than a week,Citi had more than 1000 developers fromaround the world registering to gain accessto functioning APIs in a sandbox environ-ment, with artificial data to build workingprototypes,Mr Greene reports.

Within a week, several start-ups had builtworking applications integrated with CitiAPIs and exhibited on the bank’s stand at theSingapore Fintech Festival. “The imagina-tion and creativity that we can harness byopening our doors to the outside is extraor-dinary,” says Mr Greene. “We believe thatbanks can’t build, own and operate every-thing by themselves anymore – the world isclearly no longer working that way. We wantto partner, collaborate and play a scale-ena-bling role in the fintech revolution.”

Likewise, HSBC is investing inmaking iteasier to work together with third parties,moving beyond a world where banks buildeverything in house. The bank is alsomovingaway from multi-year IT change pro-grammes, according to Josh Bottomley, chiefdigital officer at HSBC, and is looking torelease deliverables based on minimum via-ble products and regular iterations. “Thatmeans we can deliver benefits faster for ourcustomers and fine-tune our investment pri-orities and delivery roadmaps,” he says.

THERIGHTSKILLSMr Bottomley touches on one of the biggestchallenges banks face when going digital:pivoting the whole organisation to an agileway of working. AsMr Dab says: “An incum-bent bank hasn’t been designed for innova-tion. And to make it more innovative is a bigtransformational challenge, with changes toprocesses, culture, mindsets, behaviour,incentives, performance management,organisation skills and so on.”

Mr Dab believes that opening up thebank to the outsideworldwill solve a big partof the culture challenge. ING, for example,launched its innovation bootcamp in 2014,and the bank benefits from developing greatideas, but also experimenting with new waysof working in a risk-free manner. ING Bel-gium also launched a fintech village, where ithosts selected external fintechs for three orfour months. “We believe that much of ourinnovation in the future will come from out-

side,” he says. “Therefore we work, collabo-rate and partner with fellow providers,start-ups, fintechs, and so on.”

And by changing the culture and mod-ernising the way they work, banks may justhave a chance at attracting top talent to fuelfurther transformation. “Many banks tourSilicon Valley looking for inspiration for theirmanagement teams.Butbanksmust alsopro-mote a culture of innovation throughout theirfirms to retain the best and brightest,” saysAnthony Jenkins, ex-group CEO of Barclaysand current executive chair of 10x FutureTechnologies, a cloud computing firm.

“That doesn’t just mean hiring peoplewho can come up with new ways to tradefinancial derivatives; it means encouragingall employees to find ways to contribute tothe business as a whole, whether it’s internalprocesses or new products,” he adds.

“As part of Citi’s pivot to an agile way ofworking and being more customer-centric,we are hiring people from a wide range ofnon-financial backgrounds and puttingdesign at the centre of what we do,” reportsMr Greene. It has integrated in-house designteams into all the bank’s customer experienceactivities. The bank has also incorporatedlegal and compliance experts into project‘scrum teams’ to flag and resolve any potentialregulatory issues at the earliest opportunity.

VALUE INTHECOMMUNITYIn the future, Mr Ebstein envisages a newstyle of banking that goes beyond the currentsituation. “Banks arewell placed to play a big-ger role in their customers’ lives than just pro-viding a mortgage or a credit card,” he says.“They should be looking at providing broaderservices that help their clients tomanagemul-tiple aspects of their lives. And while thebanks themselves may not provide all theproducts and services, they could develop andmanage a trusted partner ecosystem.”

“With many banks trimming their work-force, one could imagine a bank startinglarge-scale education programmes to retrainpeople and address the industry’s skill short-age, something like a university,” he suggests.“Moreover, instead of closing branches, bankscould use them to help local communities, forinstance by supporting new entrepreneurs.”

Barclays isdoing the latter. Ithas launchednine Eagle Labs in the UK, convertingbranches into spaces to help small businessesand those in the local community who havetechnology-based capabilities to do rapid pro-totyping and come to market. “We help newbusinesses engage with the local community,which in turn will help them to become uni-corns of the future,” saysMrHammerstein.


There is a risk ThaT

mosT of The value will

be passed To consumers

in The form of beTTer

service and greaTer

convenience buT may noT

TranslaTe inTo addiTional

value and profiT for banks

David Dab

REGULATION


“At Barclays we’ve been rolling out a pro-gramme over the past three to four years,where we’ve spent more than £150m[$189m] transforming our compliance func-tion,” says Mike Roemer, group head of com-pliance at Barclays Bank. That investmenthas been split between two areas: technologyand in defining the role of compliance officersby training them in newways of operating.

Barclays’ technology spendhasbeenheav-ily dedicated to e-commerce surveillance,combating crime, compliance and electroniccommunication capabilities, and could endup

AdecAde fromnow, bAnkingwill be very

different from whAt it is todAy, as it isreshaped by technological innovation andgrowing regulatory demands.

New players will emerge – some fromoutside traditional banking – and new busi-ness models will take hold. Banking is cur-rently caught in a pincer movement betweenrising regulatory costs and challenging mar-ket conditions against a background of rapidtechnological progress, which is both athreat and an opportunity.

REGULATORYPRESSUREHuge regulatory pressures emanating fromG20 initiatives following the financial crisisand more recently anti-money laundering(AML)andanti-terror legislationhave forcedbanks to lean more heavily on technology tocounter dwindling returns on capital.

“Capital levels have goneupdramatically,”says John Liver, global regulatory reformleader for Europe, theMiddle East, India andAfrica (EMEIA) financial services at EY.“Compliance teams have increased consider-ably, with much of the recent hiring aroundfinancial crime, transactionmonitoring, test-ing andAML. It all adds up to big numbers.”

For instance, Federal Financial Analyt-ics, a policy analysis firm, estimated that thesix largest US banks spent a staggering$70.2bn in the six years to 2013 on regula-tory compliance. One of those banks spent$50m in 2015 on technology and talent justto deal withUS resolution rules.

The main regulation-related costs are forbuilding the systems, establishing processesand higher capital requirements. Though theregulatory reform agenda is nearing comple-tion, particularly on theprudential side, banksstill face years of investment while also digest-ing a fast-growing volumeof conduct rules.

DEMANDINGCUSTOMERSTheir spend needs to cover not only compli-ance, but also changing customer require-ments around digitisation and convenience,in order to help fend off competitors.

absorbinganother£100mover2016and2017to keeppacewith rapid technological change.

Know your customer (KYC) and AML,always important for banks, are receivingmore attention as regulators continue totighten rules. “It’s one of the most expensiveareas for compliance. It’s very competitiveas there’s a lot of poaching of talent, as wellas a need to keep pace with technologybecause of cyber risks and data privacyissues,” saysMr Roemer.

Though technology is crucial for businesssustainability – some banks still use tradi-tional approaches to maintaining profitabil-ity – “some are attacking [higher capitalrequirements and charges] through complextreasury management systems that aim tooptimise collateral”, says Neil DeSena, themanaging partner of SenaHill, a merchantbank bringing together global banks andfinancial technology (fintech) innovators.

“Others approach it from a non-tradi-tional way, such as creating new instrumentsto offload credit risk, which will virtuallyeliminate billions of dollars in capitalrequirements and charges,” he adds.

DATA IMPORTANCEA silver lining in this regulatory raincloud isthe accompanying demand for data neededfor regulatory compliance. True, it is provingenormously expensive to put all the new sys-tems in place to collect and process all thisdata, but it is also forcing banks to becomemore efficient and data-centric. One excitingdevelopment is the creation of ‘data lakes’,where the various banking functions, such asmarketing, can pick up on new trends andcompliance can detect unusual activityrequiring investigation.

One important area where data will playa role is in restoring trust between banks andusers. So called de-risking is making banksnervous of dealing with some of their peersor taking on certain clients in case AMLissues surface, which could lead to harsh reg-ulatory sanctions. The emergence of e-pass-ports should in future make checking

HOWTOSURVIVE INTHENEWREGULATORYAGERegulationThe banking industry is facing massive disruption, not just from the new entrants in themarket but also from regulatory pressures across many jurisdictions, writes Justin Pugsley.


The ComplianCe

Teams have inCreased

Considerably, wiTh muCh

of The reCenT hiring

around finanCial Crime,TransaCTion moniToring,TesTing and aml. iT all

adds up To big numbers

John Liver

REGULATION


identities far easier and more robust, andwill help restore ‘trust’ among participants.

However, most big banks have been builtout of merger and acquisition sprees andremain an amalgam of different processes,cultures and IT systems. The current costpressures are a catalyst to finally integratethese various bits of the organisation.

“Youneed to get all these systems to talk toeach other before you can get the efficienciesandeconomiesof scale,” saysFranReed, anex-investment banker and regulatory strategistwith financial research solutions providerFactSet. He adds that though this process ischallenging, it can drive big rewards.

Meanwhile, investors are becomingimpatient as they watch banks deploy vastamounts of capital to remain in businesswhile their returns on equity have languishedfor years. “The cost pressures are such nowthat boards and investors have been asking tosee the value in all the investment that’s goneintonew systems and theywant to see the dif-ference it has made before they go throughanother round of investment,” says Mr Liver.

COLLABORATETOSAVEOne route to lower costs is collaboration. Arecent example is Project Sentinel, a multi-bank initiative to share implementationcosts on the pieces of the EU’s Markets inFinancial Instruments Directive II (MiFIDII) requirements for dealing in over-the-counter securities.

Sentinel aims to automate, generateeconomies of scale, create consistent inter-pretations of MiFID II and build in flexibil-ity so it can work with other regulatoryregimes such as Dodd-Frank in the US. Butthird-party providers are also bringingfinancial institutions together in new ways tooffset concerns over falling secondary mar-ket liquidity in fixed income, for example.

Toronto-based Overbond, a platform thatbrings together bond market participants, isone of those initiatives. Chief executive VukMagdelinic explains that broker-dealers,many of which are bank owned, often onlyhave a limited number of relationships, whichis a problem with falling liquidity levels.

“The platform offers them the ability toform relationships with more market partici-pants,” says Mr Magdelinic. He adds that itleads to better pricing and for new issuanceallows originators and sponsors to get a betterfeel for where new issuance might be priced.

TECHUSEBanks are also capitalising on technology toenhance their competitiveness. BNP Pari-bas, for example, over the next three to four


years is looking at how to deliver better cus-tomer experience and is adapting its clientrelationship models using new technologiesrelating to the web and virtual agents.“We’re still in the early stages and are work-ing on several prototypes,” says PhilippeRuault, chief innovation and digital officerat BNP Paribas.

He says the bank is looking at increasingautomation to improve reporting to clientsand regulators, and investing in new technol-ogies – including digital signatures and opti-cal recognition – to support the customerexperience and protect against cyber crime.

Areas such as automation hold realpromise for delivering cost savings andimproving data quality. “The whole field ofrobotic process automation is effectivelylooking at the work done by humans that arobot can take over, such as data collection,aggregation and reporting – that has been ahuge area of focus for efficiency gains wherevendors promise savings of 30% to 50%,”says Patrick Craig, regulatory technologyleader for EMEIA financial services at EY.

Banks are particularly keen on usingautomation for tasks relating to KYC, duediligence, transaction monitoring, investi-gations and sanctions. These areas caninvolve a lot of manual labour and createrisks from human error. For instance, whenanalysing the work of due diligence andinvestigative teams, it is not uncommon tofind that up to 80% of their time can be ded-icated to data collection and aggregation,while just 20% is spent making a judge-ment call or passing it further up the chainof command for a final decision.

FUTUREOFBANKINGMr Ruault believes that in the future bank-ing will move towards platforms that mighthost products from other providers butwould ultimately leverage a large bank’sdiverse client base, capital position, trustand brand name. This could be a basis fordeveloping new business models involvingthird parties or enabling clients to more eas-ily do business with each other.

“Play forward the fourth industrial revo-lution around data and analytics – this shiftshow you begin to imagine future banking ser-vices,” says Mr Craig, who also sees a futurewhere customers coalesce around trustedplatforms or ecosystems to obtain the finan-cial services they want. “Think of it as being abit like apps on a smartphone,” he adds.

Mr Craig also foresees greater specialisa-tion taking place in financial services, par-ticularly around high-risk areas that requireadvanced risk management skills.

The whole field

of roboTiC proCess

auTomaTion is effeCTively

looking aT The work

done by humans ThaT

a roboT Can Take over,suCh as daTa ColleCTion,aggregaTion and reporTing

Patrick Craig

TECHNOLOGY


For incumbent banks and investors

looking to partner with – or make a

return From – the many Financial tech-nology (Fintech) start-ups in the

market, it is easy to get swept away withthe hype. A lot of the ideas being discussedare completely new and innovative, andfor many long-standing businesses the pro-cess of digitisation is compelling new waysof working.

Fintechs are a key part of the new land-scape and are seen both as rivals and part-ners to existing financial service providers,with some offering a completely new ser-vice altogether. Their technological ele-ment should add value to the service and insome way disrupt the existing businessmodel. As Philippe Gelis, chief executive atforeign exchange and payment fintech spe-cialist Kantox, explains: “Without an ele-ment of disruption, we are talking aboutfinancial services with a technology com-ponent, not fintech.”

At a high level, disruptive innovationcan have two main impacts within finance,says Matt Hatch, Americas fintech leader atEY. “The first is providing financial servicesto the unbanked or under-banked,” he says.“There are 2.5 billion people globally whodon’t have access to financial services,either in its entirety or partially, but 1 bil-lion of those now have smartphones, whichcan act as a gateway [for financial ser-vices]. The second impact is felt throughthe provision of cheaper, more accessibleand more value-added services for thosewho already have access to financial prod-uct and services.”

IDENTIFYINGTHEOPPORTUNITYDigging a little deeper, the ‘financial’ part of‘fintech’ may span many different busi-nesses, across the capital markets, retailbanking, wealth management and insur-ance. Fintechs are looking to provide spe-cific componentised services in thesespaces, or even a full service such as retailbanking. Whatever idea the firm may have

at its core, the disruptive element has to beembedded within its intellectual property ifit is to be viable in the long run.

“Is a company just using the internet tocreate an agency model, or is it actuallybuilding sustainable advantage via analyt-ics?” asks Giles Andrews, CEO of directlending platform Zopa, a fintech thatlaunched in 2005.

Mr Gelis adds: “I think it will becomeharder for fintech firms that are market-driven and are basically disruptive by justbeing cheaper; the long-term value residesin a firm that has technology that adds valueboth for the user and the industry.”

The competitiveness of the field, the sizeof the opportunity and customer demand aredifferent in each sector and affect the capac-ity to disrupt. To illustrate, 17.6% had usedfintech services for payments, 16.7% forinvestment and saving, and just 7.7% forinsurance, according to EY’s Fintech Adop-tion Index, which surveyed 10,000 digitallyactive people globally.

Imran Gulamhuseinwala, global fintechleader at EY, says: “Trying to engage withand enthuse a customer through traditionalfinancial services products is tricky. Forexample, I have yet to see anyone droppinginto a bank branch because they get a kickout of refinancing their mortgage.”

DISRUPTIVEREGULATIONRegulation presents an opportunity toplough a new furrow in an existing busi-ness, either to help overcome a compliancechallenge or to fill a new service role. Retailbanking is being actively disrupted by regu-lators who, via the EU’s Payment ServicesDirective 2 (PSD2) and the UK’s OpenBanking initiative, are forcing the incum-bent firms to open their application pro-gramming interfaces to third parties.Fintechs will be able to gain permissionedaccess to client account and transactionaldata, and can then offer services directlyto bank customers, including servicesthat compete directly with the banks, suchas payments.

“PSD2 is a game changer for me,” saysMr Gelis. “Banks will have to share all oftheir customer data, creating a viable basison which firms can offer new services thathave not existed before. Payment providersmay be given permission to initiate transac-tions on behalf of banks’ clients. This meansthat banks are losing the client relationship,which is where the money is.”

In addition to the UK and EU, China isalso seeing a revolution in the paymentsspace. In the second quarter of 2016, the

THEVALUE IN FINTECHTechnologyTo offer real value to investors, clients and partners, fintech companies need to balanceopportunity, solution maturity and a sustainable business model, writes Dan Barnes.


There are 2.5 billion

people globally who don’Thave access To financial

services, eiTher in iTs

enTireTy or parTially,buT 1 billion of Those

now have smarTphones,which can acT as a gaTeway

[for financial services]Matt Hatch

TECHNOLOGY


People’s Bank of China reported that agreater volume of electronic payments inChina were transmitted by non-banks thanby incumbents, according to James Lloyd,Asia-Pacific fintech leader at EY.

“[In China] banks continue to dominatein terms of high-value payments, but non-banks are disintermediating person-to-per-son and retail payments,” he says.

STRUCTURINGANDTIMINGHaving spotted an opportunity and a viablesolution, the right team and structure will beessential for a fintech to grow its businessand be successful. In addition, tappingindustry experience can be useful whenestablishing a business model. While earlyentrants were able to capture first-moveradvantage, many of these entrepreneurs –and their backers – lacked finance services-specificexpertise, saysMrGulamhuseinwala,leading to problems in modelling the cost ofcustomer acquisition.

“They frequently modelled [customeracquisition] at about $15 to $20. It’s fair tosay that they were in for a shock when theyfound these costs often to be 10 times thatamount,” he says. “Many fintechs still haven’tworked out how to cost-effectively connectwith the public. They are now reaching outto the financial institutions that have thoserelationships and hence end up workingwith banks.”

However, while a larger partner on boardcan be highly advantageous in getting accessto an existing customer base, those sorts ofrelationships are only viable once the start-up has proven its idea can stand up, accord-ing toMr Andrews.

“You can’t launch a fintech businesssolely based on a partnership, as you haven’tproven your capabilities,” he says. “When fin-tech businesses launch, often they definethemselves by what they aren’t – mainlybecause themarket understands the alterna-tive. For example, Zopa wasn’t a bank. As afintech develops proven capabilities, then itcan start to define itself by what it is andbegin to look for partnership opportunities.”

PATIENTAPPROACHHaving patiencewhenmaturing the start-uphas other advantages. Entering a field wheremistakes have already been made, and canbe learned from, will allow the start-up tokeep its feet when early in the process ofbuilding the business and establishing itssustainability. It can also help if one is nottrying to engage with a concept for the firsttime, notesMr Andrews.

“In some cases it’s helpful not to be the


first because one of the things that mostbusinesses like ours are trying to do is changepeople’s fundamental behaviour and that’shard, involves building quite a lot of trustand takes time,” he says.

SUSTAINABILITYANDDISRUPTIONOnce a fintech has tapped a rich vein with arobust disruptive solution, it will still needto ensure it can sustain momentum. Thatwill require a support network of partners,investors and advisors to help it grow. Thosefirms wishing to work with fintechs willneed to exhibit an understanding of themodel that allows these innovators to grow,and not force them into an existing corpo-rate model.

That also means supporting start-upswhen they can deliver better value for thecustomer, instead of pushing customerstoward traditionalmodels outside their cho-sen platform. “If you look at themassive suc-cess of the Chinese fintechs, you’ll see thatit’s not a good idea to have your customersgo ‘off ramp’ and then come back on again,”says Mr Gulamhuseinwala. “It is much bet-ter to embed the transaction within youroffering from the outset and retain controlof the relationship.”

China has provided some innovativeexamples of fintech models, in part becausethe banks remained almost exclusivelyfocused on servicing state-owned enter-prises and corporates, while the majority ofconsumers and small businesses were una-ble to access basic credit and investmentproducts. EY’s Mr Lloyd says: “There was avacuum into which some of these technologyplayers moved with solutions that were anorder of magnitude better than those thatpreviously existed.”

Some of these models, such as the col-laboration between digital retail giant Alib-aba and Tianhong Asset Management,whose products are distributed by Alibaba,have shown that fintech is not solely aboutstart-ups, but can be about disruptive busi-ness models developed by existing compa-nies taking a digital-first approach.

Mr Gulamhuseinwala says,“We moni-tor more than 20,000-plus fintechsthrough our proprietary database to helptraditional players navigate the space andidentify opportunities to invest and part-ner. We think that the number of newentrants will continue to increase substan-tially, but that the second wave is morelikely to be established through non-finan-cial services companies looking to attackthe financial services activity chain to sup-port their core business.”

is a company jusT using

The inTerneT To creaTe

an agency model, or

is iT acTually building

susTainable advanTage via

analyTics? Giles Andrews

AUDITS


One Of the questiOns asked in the imme-diate aftermath Of the financial crisis

was whether auditOrs were ‘the dOgs

that didn’t bark’, signing off on financialstatements of institutions that later col-lapsed. To address these concerns, the Euro-pean Commission (EC) has introduced newrules on statutory audit, which became appli-cable throughout the EU on June 17, 2016.

The reform aims to improve audit qual-ity and restore investor confidence in finan-cial information, an essential ingredient forfuture investment and economic growth,says the EC.

Themain objectives of the reform are to:• Ensure further transparency on the finan-cial information of companies;• Provide statutory auditors with a strongmandate to be independent and exert pro-fessional scepticism;• Contribute to amore dynamic auditmarketin the EU; and• Improve the supervision of statutory audi-tors and the coordination of audit supervi-sion by competent authorities in the EU.

THEPOWEROFKNOWLEDGEKey measures include increasing the infor-mational value of the audit report. For exam-ple, differentiation has been made betweenpublic interest entities (PIEs) and non-PIEs.PIEs are defined as all companies listed onan EU-regulated market and unlisted bank-ing and insurance companies and groups,unless they are small.

The audits of PIEs will be required toreport on key areas of risk of material mis-statement of the annual or consolidatedfinancial statements. In addition, statutoryauditors must explain the extent to whichthe statutory audit was considered capableof detecting irregularities, including fraud.

The audit committee has beenstrengthened, with requirements for mem-bers to be independent and to have compe-tence in the relevant sector. The committeewill appoint the statutory auditor, or theaudit firm, and will monitor the statutoryaudit, as well as the performance and inde-

pendence of the auditor.Some financial institutions have used

the same auditor for 50 years or more, and itis suspected that such a long-standing pro-fessional relationship could undermine anauditor’s independence. The EC believesmandatory audit firm rotation will helpreduce “excessive familiarity” between thestatutory auditor and its clients, limit therisks of carrying over repeated inaccuraciesand encourage “fresh thinking”, thusstrengthening the conditions for genuine“professional scepticism”. PIEs will be

THEMILLENNIALAUDITRestoring confidenceThe auditing of financial institutions has changed little over many decades, but the combined forces of post-financial crisis regulatory reform and digitisation are transforming the audit world, writes Heather McKenzie.


required to change their statutory auditorsat least every 10 years.

LEVELPLAYINGFIELDThe amended directive also encourages thedevelopment of a level playing field for auditfirms at EU level to foster “more dynamicand open audit markets”. It established a‘European passport’ for audit firms to facili-tate cross-border mobility within the EUand strengthen the singlemarket for audit.

“We expect the EU’s reform to create amore robust audit process that enhancesthe quality of statutory audits in Europe,”says one EC official. “Several of the key ele-ments of the reform should enhance auditquality, including stronger public oversightof auditors, a stronger role for audit com-mittees, more stringent requirements topromote the independence and profes-sional scepticism of auditors and extendedreporting by auditors.”

Vincent Roty, EY partner and audit inno-vation leader for Europe, the Middle East,India and Africa (EMEIA) financial services,says: “The financial crisis and the regulatoryresponse to it, such as the EU audit reformsand the changing public expectations offinancial services, indicate that the time isright to reconsider the purpose of an audit.Audit is becoming less likely to be viewed as acompliance activity. Today, the expectation isthat audits should provide a level of comfortto all stakeholders, which include sharehold-ers, regulators and the public.”

This change in perception is important,he adds, because it will enlarge the scope ofthe audit to provide assurance not only onthe financial statements, but also on otherareas such as risk and valuation techniques.

As increased responsibility is placed onaudit committee members and non-execu-tive directors, they will ask how they can bet-ter challenge management of financialinstitutions, says Mr Roty. “This opens anopportunity for trusted third parties to addvalue to the audit process. Such third partiescan provide insights into best practice in theindustry and provide benchmarks, while

Companies want to make

sure they have quality

assuranCe, therefore

boards and audit

Committees realise

they have to pay more

attention to the quality

of the auditor they have

Melanie McLaren

AUDITS


maintaining client confidentiality.”Melanie McLaren, executive director for

audit and actuarial regulation at the UK’sFinancial Reporting Council (FRC), agreesthat corporates are no longer viewing auditsas solely compliance exercises. “There is nowa focus on assurance and its value. Compa-nies want to make sure they have qualityassurance, therefore boards and audit com-mittees realise they have to pay more atten-tion to the quality of the auditor they have; itis not just a utility,” she says.

DIGITISATIONIMPACTAs the regulatory reforms to the audit pro-cess begin to influence long-establishedpractices, the digitisation of financial ser-vices is further changing the audit landscape.

With the implementation of digitaltechnology and big data systems, analysiscan be undertaken on entire portfolios anddata sets, rather than just a selection as isthe case with sample-based audits, says MrRoty. For example, the time saved in beingable to automate parts of the audit will ena-ble more value-added tasks to be under-taken, such as analysis, insights and BaselIII model benchmarking.

“Greater assurance can be providedabout what a bank’s management says aboutits risk appetite and conduct throughout thegroup,” he adds.

There is also growing demand for for-ward-looking audits and for discussionswith management and the board of directorsabout emerging risks such as cyber and datasecurity and quality. “The expectation is thatauditors will provide a view on that, compar-ing the institution with others and assessingwhether the risks are properly addressed inthe statements,” says Mr Roty.

BLOCKCHAINBREAKDOWNInnovative technologies, such as block-chain, have strengthened the argument for‘continuous audits’. A continuous audit ena-bles independent auditors to provide writ-ten assurance on a subject matter, for whichan entity’s management is responsible,using a series of auditors’ reports issued vir-tually simultaneously with, or a short timeafter, the occurrence of events underlyingthe subject matter.

Professor Dr Leen Paape, dean of Nyen-rode Business Universiteit in the Nether-lands, believes blockchain will reduce theneed for traditional auditors and open theway for other skills to be included in anaudit team.

“This won’t happen overnight, but tech-nology will help audits and lead to continuous


we believe there is

a need to deliver broader

assuranCe on elements

that are not refleCted

in finanCial statements,but are important for

stakeholders, in partiCular

in finanCial institutions

Isabelle Santenac

monitoring.Data scientistswill be required inan audit team to assure that the data is cor-rect,” he says. He believes the annual reportwill be obsolete in the next five to 10 years,replaced by continuous monitoring.

Hugh Harper, strategy and operationsleader for EMEIA financial services at EY,says at present continuous audit validation,particularly with blockchain, is conceptual.Like Mr Paape, he believes any change willbe “an evolution, not revolution”.

Mr Harper believes that with new tech-nology, some form of continuous monitoringand verification will occur alongside the corebusiness system controls of the audit. How-ever, when making longer term auditappointments today, the medium-term evo-lution in audit scope, practice and disci-plines and an audit team’s ability to lead andadapt in this environment are new consider-ations for audit committees.

THEAUDITOFTHEFUTUREIn seeking to make financial institutionsmore transparent, financial regulators havecreated a paradox as audits become muchmore complex, says Mr Paape. “In demand-ing that financial institutions become moretransparent, we may create all types of sys-tems that will make it very complex so thatpeople at large don’t understand what is inthe audit report,” he says.

He cites the International FinancialReporting Standard 9 (IFRS 9) regulationthat was recently endorsed by the EC. Thereporting standard is mandatory from Janu-ary 1, 2018 and comprises classification andmeasurement, impairment and hedgeaccounting. Unlike hedge accounting underIAS 39, the new standard enables companiesto better reflect their risk management activ-ities in their financial statements.

“Auditors should not just ensure theannual report is more helpful for stakehold-ers, I would like to see them also ensure theinformation is more relevant; they shouldlook at the company as a whole,” says MrPaape. An alternative is to audit ‘in control’statements that describe the risk manage-ment and control systems of organisations.This, however, would involve a lot more workon the part of the auditor, he says.

AQUESTIONOFVALUEIsabelle Santenac, assurance services leaderfor EMEIA financial services at EY, saysthere is a big difference between the marketvalue and book value of financial servicesfirms, which suggests the markets are pric-ing risk or intangibles that are not at presentpart of financial statements and therefore


not audited. “We believe there is a need todeliver broader assurance on elements thatare not reflected in financial statements, butare important for stakeholders, in particularin financial institutions,” she says.

For example, the regulatory capitalratios set out in the Capital Adequacy Direc-tive are important measures but are not partof an audit review. “The capital, liquidity andleverage ratios aremore important for inves-tors and regulators than the pure financialstatements,” saysMs Santenac.

Regulators focused on these ratios fol-lowing the financial crisis as they sought tostrengthen the capital and liquidity of banks.In turn, banks have had to significantlychange the way they manage their capitaland liquidity. For auditors to remain rele-vant, saysMs Santenac, theymust assess andprovide assurance on matters that areimportant to stakeholders, which includesinvestors, regulators and the general public.

The EC official says the regulator isaware there is a debate about an “expecta-tions gap” in audits. “Certainly, auditorsmust thoroughly understand the auditedentity’s business model, risk appetite and soon. This is particularly important for auditsof financial institutions. However, the auditremains focused on the financial state-ments,” the official adds.

“Having said that, the extended auditreport and the additional report to the auditcommittee required for PIEs require thatauditors address a broad range of relevantmatters, including significant risks of mate-rial misstatements, an assessment of valua-tion methods applied to items in thefinancial statements and a report on anydeficiencies in the audited entity’s internalfinancial control system.”

FORWARDLOOKINGAccounting standards such as IFRS 9 areencouraging auditors to take a more for-ward looking view of credit risks, for exam-ple, which will require auditors to includemore credit risk specialists in their teams.“The trend in audit is to broaden assurance,going beyond the financial statements,” saysMs Santenac.

Ms McLaren also cites the more for-ward-looking element of audits as impor-tant. “Audits are not done in a vacuum andthe issue to be addressed is whether an audi-tor is looking at the right things, particularlynon-financial aspects. The concept of strate-gic reporting has emerged as stakeholdersnot only need historical information in thefinancial statements, but also on a company’sprospects,” she says.


AUDITS

the finanCial Crisis and

the regulatory response

to it, suCh as the eu audit

reforms and the Changing

publiC expeCtations of

finanCial serviCes, indiCate

that the time is right to

reConsider the purpose

of an audit Vincent Roty

The FRC, through its UK CorporateGovernance Code, has introduced a require-ment for directors to provide a viabilitystatement that sets out how long they rea-sonably expect the business to be able to setits liabilities as they fall due. For banks thereare special considerations and so the FRChas developed supplemental guidance.There have also been other reporting devel-opments to promote more transparencybetween audited financial statements andthe reporting tied to capital adequacy.

“The regulatory Pillar Three informationis in the public domain but there is no obli-gation for it to be audited. However, an audi-tor must make sure that information isconsistent with the understanding it hasgained through auditing the financial state-ments,” saysMsMcLaren.

TRANSFORMINGTHEMARKETUntil a few years ago, there was not really anaudit market – the level of rotation of auditfirms was low and usually stimulated by amerger and acquisition event or for someindependence issue. Regulatory reforms,digitisation of the financial services businessmodel and greater social interest in financialservices firms are beginning to reshape thenature of the assurance sector.

Mr Harper says “almost overnight”,stakeholders and clients have placed agreater focus on the audit selection anddesign. Efficiency and transparency arebeing improved and there has been a “matur-ing of understanding” of what firms want inan auditor and how to “buy” an auditor.

He adds: “In 10 years, an audit will lookvery different to what it does today becausebusiness systemsare changing, as is thenatureof risk that is being evaluated in an audit. Thiswill require a new set of disciplines in auditteams, covering areas such as cyber risk anddata science. Audits will become even moremulti-disciplinary, expertly architected tocombine broad skills and expertise. The daysof the generic audit and general auditor aretruly becoming a thing of the past.”

The EC official says the retendering androtation has forced auditors to rethink howthey deliver value and quality to their cli-ents, adding: “Audit committees bear animportant responsibility to ensure that thenew audit legislation works as intended.They need to act as the guardians of theauditor’s independence and ensure thatauditors can effectively perform their duties.Many large financial institutions have long-standing and professionally run audit com-mittees but this is not yet the case for allfinancial institutions.”

Documents

The digital imperative - EY - United StatesFILE/... · January2017|THEBANKER|3 4BANKINGON PURPOSE Afteratsunamiofscandals comesthereckoning.Butarefinancial institutionsreadytodosome