23 January 2025
A new report from Herbert Smith Freehills’ global Financial Services Regulatory (FSR) team analyses the perpetually changing regulatory and operating environment facing the financial services industry in 2025.
In a series of articles, ‘Global FSR Outlook 2025: Perpetual Motion’ examines the most pressing areas of focus for the industry this year. Our experts cover a host of intersecting concerns which are set to top the regulatory agenda over the next 12 months, from how financial firms and regulators are approaching the potential benefits and risks presented by evolving technology such as AI, smart data and quantum computing, to how the industry is getting to grips with demographic changes such as an aging population seen in many advanced economies.
Commenting on the report, Herbert Smith Freehills’ Global Head of FSR, Jenny Stainsby says: “The cycle of continuously evolving financial regulation can feel like everything is happening all at once. In our Global FSR Outlook 2025, we look at how firms can effectively adapt to, and plan for, the complexities of this ever-changing environment.”
Articles in this year’s report include:
- The long and winding road of regulatory overhaul: Balancing stakeholder expectations with fast-evolving technology, geopolitics and global competition for growth puts regulators in an unenviable position.
Commenting on this topic, Hywel Jenkins, Partner in London says: “Delivering consumer protection and market integrity while not stifling innovation and growth has been the regulators’ balancing act for some years. It will be interesting to see how the move to outcomes-based regulation impacts this and whether the lack of certainty around compliance stimulates or hinders innovation.”
- Adopt, adapt, improvise? The new regulatory approach?: Challenged by resource constraints, regulators are deploying tools and powers in increasingly novel ways – a trend that looks set to continue.
Commenting on this topic, Danielle Briers, Executive Counsel in Sydney, says: “It’s a given that firms need to be on the front foot to respond to regulators’ changing approaches. But anticipating where regulators are – or might be – going next is a key skill firms need to grow.
- Many roads lead to Rome – Paths to redress and remediation: Supported by regulators’ commitment to consumer protection, remediation and anti-fraud initiatives, there are several channels to seek redress.
Commenting on this topic, Hannah Cassidy, Partner in Hong Kong, says: “With fraud on the rise, consumer redress and remediation continue to move up the list of regulatory priorities, not least because of public and/or political pressure.”
- The sanity of crowds – can smart data transform consumer finances?: Smart data initiatives have an as yet unrealised potential to transform how data works for consumers.
Commenting on this topic, Dr Timo Buehler, Partner in Frankfurt, says: “While open banking has yet to reach its full potential, a combination of technological developments and changing consumer expectations could help to move things along.”
- Juggling water – how to regulate AI in financial services?: To regulate one way, to regulate another way or not to regulate at all… The conundrum will continue for regulators into 2025 even as some regimes move closer to implementation.
Commenting on this topic, Charlotte Henry, Partner in Sydney, says: “Once regimes for AI have been agreed by policymakers, they need to be implemented quickly to avoid the regime being out of step with technological advancements.
- Teetering on the brink of quantum utility – not if, but when: Quantum computers are expected to be able to break currently used cryptographic algorithms by the early 2030s, putting data and information at risk. Firms need to take steps now.
Commenting on this topic, Karen Anderson, Consultant in London, says: “Crytographically-relevant quantum computing is not far off – work is needed today to head off tomorrow’s security challenges.”
- Rewiring the infrastructure: Technological developments are facilitating greater transactional speed which may help regulators deliver the growth objectives governments are increasingly imposing on them.
Commenting on this topic, Marina Reason, Partner in London comments: “Regulators need to do some heavy lifting to deal with the global fragmentation in policy frameworks for emerging tech – but addressing this and related challenges could pay dividends.”
- A growing clamour… can NBFI get out of the shadows?: More than a decade on from the 2007/08 global financial crisis NBFI, by and large, remains a regulatory orphan.
Commenting on this topic, Lisa Fried, Partner in New York, says: “The current regulatory patchwork for NBFI is a source of uncertainty for NBFI institutions, banks, and investors. Keeping track of what the requirements are will be a challenging task.”
- The anxiety of aging – what changing demographics mean for financial services: Changes to demographics, such as ageing populations in many advanced economies, can pose fundamental public policy challenges and impact on financial services in many ways.
Commenting on this topic, Grant Murtagh, Partner in London, says: “Demographics are fundamental to how financial services firms operate – as more countries experience the phenomenon of ageing populations, this issue is coming increasingly to the fore for governments, regulators and firms.”
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