As we approach the third anniversary of the Dodd Frank Wall Street Reform and Consumer Protection Act in July, it is worthwhile to take a look at its impact on banks and their respective IT departments so far.
The implementation of the rules has been fraught with delays and confusion. The regulators who were entrusted with the job of proposing the rules and transforming the guidelines into policies have struggled to reach consensus with the industry, and have therefore been forced to repeatedly revise and delay compliance dates. The ongoing process prevented the initial implementation of strategic solutions, since firms were not willing to risk investing in new technology until the final rules came into better focus. If we accept the inevitability of these new business requirements, we can try to look at the regulations in a different light — that of an opportunity for businesses to leverage regulatory change to improve their efficiencies and achieve strategic goals.
Playing Dodd-Frank Limbo
Though many of the Dodd Frank rules are still in limbo, many have been successfully implemented. However, the industry is certainly still in flux and nowhere is that more obvious than in the back-office and IT departments of swap dealers. Banks, and particularly those entities required to register as swap dealers, have seen great change in policies and procedures as well as the various system enhancements that have been necessary for implementation. For example, the Business Conduct Rules (PDF download) have required various record keeping and disclosure processes to be leveraged.
The swap reporting requirements resulting from the Swap Data Repositories (SDR) (PDF download) have required IT departments to connect their systems to third party services such as marketer in order to facilitate this process. The mandatory clearing requirements have created both operational and technological responses, as firms have had to expand or create margins and clearing capabilities to manage these new realities.