With the Democratic majority in Congress in serious jeopardy as Americans prepare to head to the polls in November 2022, Democratic control of the executive branch and regulatory apparatus will remain intact post-election. As we look forward to 2023, we expect that gridlock is likely to be the order of the day.
BNP Paribas Securities Services 10 Year Anniversary in the United States
BNP Paribas Securities Services made a strategic decision 10 years ago to build out our capabilities in the US with a phased investment approach to complete our product set including; global custody, agency securities lending, hedge fund administration and middle office and US fund administration through the acquisition of Janus Henderson’s mutual fund servicing operations. As we embark on the next phase of our US story, our focus is to drive growth in these activities and build our US asset manager, alternatives and asset owner franchises. Our recent investments will provide us the ability to service Mutual Funds and ETFs in an innovative way that will meet the requirements of the industry today and where it is heading tomorrow. By investing in our people, processes and technology, we are excited to continue our ambition to become “the leading positive-impact asset servicer and partner of choice for large financial institutions,” and a trusted US player.
To celebrate this milestone, we hosted an exclusive thought leadership event, Our Future Together: Celebrating 10 Years in U.S. Securities Services. The following are highlights from the event featuring experts on the topics related to US Economic and Geo-Political issues, Technology and Digitalization, and Sustainability, Risk and Resiliency.
Impacts of the US Economic and Geopolitical Landscape
Bridget Hagan – Partner, Mindset
Edward Hill – Senior Vice President, Head of Government Affairs, Bank Policy Institute
Tom Rosenkoetter, BNP Paribas Head of Government Affairs
- Based on current public opinion surveys that reflect on the challenging economic and geopolitical conditions, participants expect that Republicans are likely to recapture at least one (if not both) Houses of Congress in this Fall’s US elections, in line with past midterm losses among incumbents.
- Should they emerge victorious, among other things, Republicans are expected to strongly promote fiscal responsibility, a national energy policy debate and to emphasize greater oversight over the Biden administration’s policies and activities. Meanwhile, the Biden Administration is expected to utilize the levers of executive and regulatory power post-election to effect their policy priorities.
- Meanwhile, fintech regulation remains top of mind for banks, as Congress and the regulators are assessing both the benefits of technology and completion versus potential safety and soundness risks, consumer protection risks, and level playing field competiveness aspects that may be present.
- In line with the Biden administration’s “Ensuring Responsible Development of Digital Assets” executive order issued earlier this year, both public and private sector participants are engaged in early stage discussions about developing a policy framework to define digital asset products, how they should be regulated, who should regulate them and to provide more clarity about the manner in which they should be regulated.
- Conference attendees also flagged a recent Staff Accounting Bulletin from the SEC (SAB 121) that many believe raises an apparent conflict with other financial rules affecting regulated banks who may consider holding crypto-assets in custody. SAB 121 was cited as an example of why policymakers should follow the lead of the Administration and the previously mentioned executive order directing federal prudential and market regulators to undertake a “whole of government” review of the digital and crypto market and make policy recommendations. Such a review may consider the interrelated nature of the U.S. financial rules and could help to avoid conflicts or unintended consequences.
How Technology and Digitalization are Fast-Forwarding the Dawn of a New Securities Eco-System
Kelly Mathieson – Chief Client Experience Officer – Digital Asset
Jennifer Peve – Managing Director, Head of Strategy and Business Development – DTCC
Jonathan Ehrenfeld – Securities Strategy, SWIFT
Florent Thiry – Americas Head of FIC Client line, BNP Paribas Securities Services
- Client experience, increased efficiency and reduced risk are shaping the integration of industrialized digitalization into custodians and CSD end-to-end processes. Technology is just an enabler not a goal: by embracing emerging technologies, the post trade providers will deliver further efficiencies and process improvements to clients.
- Digital innovation presents an extraordinary opportunity for our industry, with the potential to simplify our models, reduce redundancies and create additional business opportunities
- With the expected growth of Digital Assets, which will have to coexist with the traditional ones, interoperability between legacy platforms and the new digital ones will be key, as investors will look for providers that are able to offer consolidated services across all type of asset classes.
- Whether or not they fully replace traditional tools, blockchain, smart contracts and other emerging technologies are here to stay, and therefore providers must continue to stay in step with these product innovations or risk finding themselves displaced.
- Adopting T+1 and, ultimately, T+0 isn’t necessarily dependent on digitalization, but rather dependent on the readiness / willingness among market participants to make the move in order to decrease credit risk without increasing the operational risk (i.e. fails). In the meantime, the DTCC pursues its modernization efforts on its technology and platforms, keeping open the option of T+0 in the future.
Lessons for Adapting to the Future Sustainability, Risk and Resiliency
Craig Leeson, journalist, and award-winning film maker of “A Plastic Ocean” and “The Last Glacier.”
Herve Duteil, Chief Sustainability Officer of the Americas for BNP Paribas
- New EU standards ensuring plastic products are properly tested for safety prior to their release are a direct result of increased public awareness around sustainability and health; even so, many other markets, including the US, remain largely unregulated.
- In 2015, BNP Paribas became the world’s first corporation to take single-use plastics out of the workplace, and since that time more than 160 countries have either taxed, levied or imposed an outright ban on such products.
- To some experts, waiting until mid-century to achieve carbon-reduction targets is too late; instead, addressing feedback loops responsible for melting glaciers and other environmental hazards must be reconciled by decade’s end.
- While current geopolitical turbulence would seemingly encourage uptake of fuel and product alternatives, the war in Ukraine and other conflicts have led to some pushback around ESG goals among certain businesses, who claim that global priorities have shifted.
- Lowering the global temperature by 1.5 degrees is crucial to containing damage to coral reefs and other ecosystems; as such, moving from fossil fuels to renewable energy sources sooner rather than later is imperative, as the longer we wait, the more difficult the transition.
- Corporations operate within markets; markets have rules; rules create incentives; and those are currently largely skewed towards the short-term, while our climate challenge is a long-term one. Only systemic reforms, by way of public policy and regulations, can integrate the long-term into our economic short-term.