Technology integration and regulatory alignment are crucial for banks’ growth, says Maveric Systems

The report sheds light on how innovation and technology are transforming financial institutions as they face increasingly stringent regulatory environments. Maveric Systems, which calls itself a specialist in banking technologyhighlights key strategies that banks should adopt. It explains the need for Indian financial institutions to adopt cross-functional teams and establish stricter regulatory compliance.regulatory technology plus banktech frameworks) to stay in tune with global banking sector trends.

At a time when regulators around the world are moving towards more strategic and data-driven oversight, Indian banks must institutionalise reporting on systemic risks and align themselves with emerging technology standards. Failure to do so could result in them falling further behind on the global stage, the report warns.

“Regulators are broadening their focus to cover both financial and non-financial risks, including emerging areas such as Basel IVenvironmental, social and governance (ESG) metrics and artificial intelligence (AI) guidelines,” says P. VenkateshDirector of Thought Leadership at Maveric Systems. “Indian regulators are making progress, but there is still a pressing need for banks to take proactive steps, including aligning with the stringent global standards set by industry leaders.” Europe and the United States.”

Europe is at the forefront in setting comprehensive technology standards, while India lags behind in digital financial ecosystems and crime prevention measures. Venkatesh also points out challenges in pay regulations and operational resilience that Indian banks need to address by aligning with global best practices.

The report suggests that Indian banks consolidate to become global systemic players, a move that would subject them to more international regulations and increase their influence in the global financial system. The report emphasizes the importance of restructuring operations to ensure that Indian banks can meet the growing demands for regulatory alignment. This includes appointing a single leader responsible for overseeing compliance, implementing data structures that adhere to regulatory frameworks, and proactively engaging with regulators to understand evolving policies and technical standards. The report urges Indian banks to proactively strengthen their financial crime intelligence capabilities, including creating a common database with other institutions, to more effectively prevent and detect financial crimes. It further recommends leveraging innovation labs to digitize policymaking and improve compliance.

According to Venkatesh, global financial regulation has evolved, particularly in the wake of the 2008 crisis and the Covid pandemic, highlighting the role of various “innovation labs” and unification of banking technology regulations in a digital context. There is an urgent need to align financial institutions with regulators, including digitizing policymaking for better intelligence and implementation. This becomes critical as challenges in payment regulation, operational resilience, AI guidelines and the need for proactive measures in financial crime prevention increase.

Venkatesh says that analytical applications, including behavioral sciences, deep neural networks, BlockchainWeb3 risk mitigation and forensic investigation are achieving significant results, especially in the area of ​​financial crimes, and regulators should focus on how to stimulate technology integration, cross-functional collaborations and implementations of banking technology-related projects.

Regulators are also stepping up their supervisory efforts to detect and prevent unethical practices such as money laundering and terrorist financing. While there is some level of coordination, there are differences in approach and timelines across the United States and Europe.

The report adds that regulators are making significant progress in strategic, data-driven oversight for new approaches to risk, which require information sharing. It also highlights that the next five years are shaping up to be the most strategic period of regulatory reform for industry data since the financial crisis. Meeting any regulatory requirement will require obtaining, capturing, processing and reporting information. Therefore, it is important to connect data from multiple sources – from lines of business, enabling functions and external data.

“In terms of global best practices, India’s financial ecosystem has areas where it performs well, but also areas where it lags behind,” says Venkatesh. “For example, how many Indian banks are in the top 20 globally? Not many. China has six.”

According to the latest rankings, there are six Chinese banks and no Indian banks among the world’s top 20 banks by total assets. Indian banks, while significant in their own domestic arena, have yet to crack the top 20.