Financial regulatory reform is just beginning

The press headlines are (mostly) celebrating passage of the financial reform act. I even got a bulk email from the president saying it was a great day for the little guy and a bad day to be a banking special interest guy. Then he asked me for 5 bucks and encouraged me to send the note on to 6 other people in my town. Wait, did the president just send me a chain letter?

But the reality is that financial reform is not at the finish line; the practical side of reform hasn’t even glimpsed the starting line. Financial reform is an agreement that more regulation and consumer protections need to be in place, but does little to define what those regulations or protections might be. There are some broad stroke intents related to making derivatives trading more transparent and changes in capital requirements that are fairly straight forward. But what information regulators will require from banks or specifics on how risk management will change are not yet understood. We don’t even know which bodies will do the regulating, or what their mandates will be.

The key for the banks will be in becoming more nimble and adjusting as the rules and regulations change and morph over the next several years. About a decade ago, corporate agility was at the forefront of business requirements, primarily because business opportunities were changing so quickly that firms with inflexible systems were being left in the dust. More recently cutting costs for higher profits has been in vogue, but we will almost certainly see corporate agility (probably disguised as some new buzzword) move back up the priority charts as a result of the Dodd-Frank act. Little else of the specifics are known, aside from the assurance that, as with all new regulations, lawyers and consultants will benefit.

To find out more about how to be ready for financial reform, please send me $5 and forward this blog post to 6 people inside your firm 🙂