Three regulatory trends stood out in 2015. Firstly, the political mood changed: the European Union (EU) shifted its agenda towards jobs and growth and the "tone from the top" of the UK's regulatory authorities shifted considerably.

Progress was also slow in completing the extensive reforms proposed in the wake of 2008's financial crisis. Lastly, there has also been more emphasis on taking a system-wide approach, questioning the cumulative impact of all of these reforms.

That's a lot of change for one year, and there's evidence we're going to see more in the next 12 months.

Each year, we look at the likely regulatory changes in financial services in our Top 10 for the year ahead. Looking back, we did quite well in 2015, averaging an 8.1 across our predictions. We're setting our stall out again in 2016 with another top 10, considering how they will affect retail banks, capital markets, insurers and investment managers.

Here are our headline expectations for the next 12 months:

  • Greater competition: The last few years has seen a great deal of media attention placed on challengers in financial services – particularly in banking. In the UK, the Competition and Markets Authority (CMA) released its provisional findings for  personal and business banking back in October. Some felt they were unambitious, but the Financial Conduct Authority (FCA) has reviews to complete in investment and business banking, as well as in investment management. We expect to see more piecemeal changes made to improve competition from these analyses, and others, in 2016 at both the EU and UK level. Many firms will need to evaluate their product and service offerings, particularly in light of an increasingly bold and emergent FinTech sector.
  • Culture and new regulation: Culture and regulation in financial services were two of the big themes to emerge from 2008's crisis. Both remain areas of focus today. Larger firms, in particular, will continue to grapple with defining and embedding culture: encouraging the right behaviours and measuring cultural change are the two key challenges. Meanwhile, the noises coming from many quarters suggest that the level of scrutiny being implemented looks like the ceiling for now. Completing unfinished regulatory business will be the modus operandi for 2016, with firms and regulators under pressure to deliver on the likes of the Directive on Markets in Financial Instruments (MiFID II), the Market Abuse Regulation (MAR) and the Financial Advice Market Review (FAMR) at both the EU and UK levels, respectively.
  • A technological and data revolution: Technology has to remain close to the top of the agenda for financial services firms in 2016. For the established players, that will require significant investment if they are to stave off the growing threat of competition and cyber-attacks. Strategic partnerships with FinTech and RegTech start-ups, the latter being companies that develop tools to help with regulatory reporting, could be one option. Acquiring these types of businesses is another. And, like technology, data is another area where firms will need to consider investment. It continues to evolve in cost and complexity, but spending here could be leveraged to deal with the ever-increasing amount of data being generated. In any case, both of these trends are likely to precipitate further consolidation in banking, especially in European markets.  

There's a great deal still to do. More than eight years after the beginning of the financial crisis, many would have expected the policy-making agenda to be largely complete; but that is far from the case.

The continuing uncertainty surrounding regulation is causing firms to postpone some critical decisions about their business models, legal entity structure and overall strategy. It also means many are struggling to realise business benefits from the significant investments they are making, quite often in haste, to comply with regulatory requirements.

In the next few weeks, we'll be looking at some of the specific challenges faced by some of the sectors within financial services.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.