Worldwide elections in 2024: What have the implications been for banks?
Elections, especially those with uncertain outcomes, can cause shifts in policy and regulation that need to be addressed by financial institutions and their chief risk officers (CROs). This year 70 nations will have gone to the polls, marking potentially seismic political shifts which could impact financial institutions – from taxation to investor sentiment and central bank policy to market regulations.
Banks like predictability, but is it realistic?
Instability and volatility can present challenges for banks, their professionals and customers. From geopolitical instability in Ukraine and the Middle East to the rise of nationalistic politics across the world, banks can’t rely on predictable outcomes and need to expect the unexpected.
Changes in policy are commonplace after national elections, and the geopolitical shockwaves can be unpredictable. With all eyes on the outcome of the US election, banks will be paying close attention to the impact. “If we want to have an environment within which people invest their money and banks can be certain that businesses are going to survive and be able to pay them back, not only do we need to have relatively low instability and volatility, but that stability has to extend to the legally sound regions as well,” explains David Coleman, Vice President, CRO, European Bank for Reconstruction and Development.
Sensitive to regulations
While the world today is more volatile, risk is perhaps perceived more intensely and immediately than ever before. In the aftermath of the global pandemic, the disruptive mini budget in the UK and the Silicon Valley bank failures, regulators are having to put more scrutiny on the market. Regulatory authorities are now under the microscope, critiquing their governance of market structures and financial stability. “Tighter regulation transfers immediately through to banks because the regulators have set standards high,” says Greg Jones, CRO, Europe & Asia Region, TD Securities.
Banks may come under review and receive guidance from regulatory bodies, leading to internal audits that may cause a heightened sense of alert. However, Jones doesn’t believe this is a permanent state within the banking sector. “We’re in a corrective phase, and this is going to lead to a more conservative set-up and greater attention to how banks operate, their ownership and self-responsibility,” he explains.
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