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On 10 February 2023, the UK’s Financial Conduct Authority (FCA) published a Discussion Paper: ‘Finance for positive sustainable change: governance, incentives and competence in regulated firms’ (DP23/1). In DP23/1, the FCA states that it believes that good governance and a healthy culture is critical to financial services firms’ being able to deliver value to clients and consumers, as well as supporting market integrity. The FCA notes that the aim of DP23/1 is to encourage an industry-wide dialogue on firms’ sustainability-related governance, incentives, and competencies. In DP23/1, the FCA highlights that certain firms have already integrated material sustainability-related risks, opportunities and, in certain cases, impacts into their business, risk and capital allocation decisions.

<p style="margin: 0in; font-size: 11pt;"><span style="font-size: 1.5rem;"><strong>On 10 February 2023, the UK&rsquo;s Financial Conduct Authority (FCA) published a Discussion Paper: &lsquo;Finance for positive sustainable change: governance, incentives and competence in regulated firms&rsquo; (DP23/1). </strong></span></p>
<p style="margin: 0in; font-size: 11pt;"><span style="font-size: 1.5rem;"><strong>&nbsp;</strong></span></p>
<p style="margin: 0in; font-size: 11pt;"><span style="font-size: 1rem;">In DP23/1, the FCA states that it believes that good governance and a healthy culture is critical to financial services firms&rsquo; being able to deliver value to clients and consumers, as well as supporting market integrity.</span></p>
<p style="margin: 0in; font-size: 11pt;">&nbsp;</p>
<p style="margin: 0in; font-size: 11pt;"><span style="font-size: 1rem;">The FCA notes that the aim of DP23/1 is to encourage an industry-wide dialogue on firms&rsquo; sustainability-related governance, incentives, and competencies.</span></p>
<p style="margin: 0in; font-size: 11pt;">&nbsp;</p>
<p style="margin: 0in; font-size: 11pt;"><span style="font-size: 1rem;">In DP23/1, the FCA highlights that certain firms have already integrated material sustainability-related risks, opportunities and, in certain cases, impacts into their business, risk and capital allocation decisions.</span></p>

On 10 February 2023, the UK’s Financial Conduct Authority (FCA) published a Discussion Paper: ‘Finance for positive sustainable change: governance, incentives and competence in regulated firms’ (DP23/1).   

UK FCA Publish Discussion Paper on Finance for Positive Sustainable Change

Industry preparations reveal a growing chasm With the implementation date now finalized, market participant firms are actively working towards readiness though the levels of preparation among financial institutions appears to be quite varied. “The move to a T+1 settlement cycle has been an ongoing industry effort for more than two years now. However, we still see people in different pockets, namely those who are very prepared and ahead of the game, versus those who are much further behind, and are not yet thinking about the changes,” said Michele Hillery, Global Manager of Equity Clearing and DTC Settlement Service at DTCC. For instance, the ValueExchange — Operationalizing T+1 survey found that 41% of the market still has not yet started planning for T+1. The survey further highlighted that institutional investors appear to be more advanced in their T+1 preparations compared to brokers and custodians3. An institution’s size is also a decisive factor determining their levels of T+1 planning. “A large broker dealer for instance, is more likely to be compliant with the rules, having already embarked on the T+1 change journey. In contrast, a small broker dealer — which is still reliant on conducting their operations through fax — will probably have a bit more work to do. Budgetary constraints at smaller financial institutions may also be hampering their T+1 efforts,” explained Michele Pitts, Head of NAM Custody Product Management Strategic Initiatives at Citi. Lou Rosato, Director of Global Investment Operations at BlackRock, shared that the $10 trillion asset manager is currently in the later stages of its T+1 planning. “We have a deep understanding and alignment on the changes that need to happen and have identified key focus areas for a firmwide and unified project with our custodians and brokers. Our formal engagement and planning began in 2022 and it is now ramping up this year,” noted Rosato. Although major institutions with substantial operations in the US understand the full implications of the T+1 move, many outside of North America are still digesting the potential changes. For instance, the ValueExchange study found that not a single Asia-Pacific based financial institution was executing their T+1 plans, nor had anyone in the region even developed a concrete T+1 project funding request4. The study also revealed that 43% of Asia-Pacific based financial institutions were still in the research and information gathering stages of their T+1 planning efforts, versus 27% of those in Europe and 17% in the US5. “The most significant impact is likely to be felt at buy and sell-side firms in Asia and Europe. They will need to make substantial changes to their operating, treasury and client service models to support their client trading in a compressed settlement environment. They will experience the most significant impact, but in many respects are the least prepared and have the most work still to do,” said Bryan Murphy, Global Head of Banks Sales, Securities Services, Citi. By shortening the settlement cycle from T+2 to T+1, market participants trading US equities will have much less time between trading and the start of the settlement cycle to perform post-trade processing6. As things currently stand under the T+2 model in the US, the trade allocation and affirmation process takes place at 1130AM Eastern Time (ET) on T+1. Following the introduction of T+1, trade allocations will be brought forward to 0700PM ET on trade date, with a 0900PM ET on trade date cut-off for affirmations. The diagram also highlights the timing challenges facing financial institutions operating in Europe and Asia-Pacific as it relates to allocations, affirmations and securities lending transactions. As the diagram shows, implementation of T+1 will mean financial institutions will have 16.5 hours less time to process allocations; 14.5 hours less time to process affirmations; and 18 hours less time to process securities lending transactions. What are some of the operational challenges market participants will be facing? And how can financial institutions navigate the T+1? Click the full report to find out. 1 Citi – Securities Services Evolution 2022 2 DTCC – FAQs 3 ValueExchange – Operationalizing T+1 4 ValueExchange – Operationalizing T+1 5 ValueExchange – Operationalizing T+1 6 AFME – September 2022 – T+1 Settlement in Europe: Potential benefits and challenges

<div><span style="font-size: 2rem;">Industry preparations reveal a growing chasm</span></div>
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<div><span style="font-size: 1rem;">With the implementation date now finalized, market participant firms are actively working towards readiness though the levels of preparation among financial institutions appears to be quite varied. </span><span style="font-size: 1rem;">&ldquo;The move to a T+1 settlement cycle has been an ongoing industry effort for more than two years now. However, we still see people in different pockets, namely those who are very prepared and ahead of the game, versus those who are much further behind, and are not yet thinking about the changes,&rdquo; said </span><strong style="font-size: 1rem;">Michele Hillery, Global Manager of Equity Clearing and DTC Settlement Service at DTCC.</strong></div>
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<div><span style="font-size: 1rem;">For instance,&nbsp;</span><span style="font-size: 1rem;">the <a href="https://thevx.io/campaign/operationalising-t1/" data-link-source="tiny">ValueExchange &mdash; Operationalizing T+1 survey </a>found that 41% of the market still has not yet started planning for T+1. The survey further highlighted that institutional investors appear to be more advanced in their T+1 preparations compared to brokers and custodians<sup>3</sup>. </span></div>
<div>&nbsp;</div>
<img style="display: block; margin-left: auto; margin-right: auto;" src="/rcs/citigpa/storage/public/icpublic/Article_Graph2.JPG" alt="" width="696" height="346" />
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<div><span style="font-size: 1rem;">An institution&rsquo;s size is also a decisive factor determining their levels of T+1 planning. &ldquo;A large broker dealer for instance, is more likely to be compliant with the rules, having already embarked on the T+1 change journey. In contrast, a small broker dealer &mdash; which is still reliant on conducting their operations through fax &mdash; will probably have a bit more work to do. Budgetary constraints at smaller financial institutions may also be hampering their T+1 efforts,&rdquo; explained <strong>Michele Pitts, Head of NAM Custody Product Management Strategic Initiatives at Citi.</strong></span></div>
<div>&nbsp;</div>
<div><span style="font-size: 1rem;"><strong>Lou Rosato, Director of Global Investment Operations at BlackRock</strong>, shared that the $10 trillion asset manager is currently in the later stages of its T+1 planning. &ldquo;We have a deep understanding and alignment on the changes that need to happen and have identified key focus areas for a firmwide and unified project with our custodians and brokers. Our formal engagement and planning began in 2022 and it is now ramping up this year,&rdquo; noted Rosato.</span></div>
</div>
<div>&nbsp;</div>
<div><span style="font-size: 1rem;">Although major institutions with substantial operations in the US understand the full implications of the T+1 move, many outside of North America are still digesting the potential changes. </span><span style="font-size: 16px;">For instance, the<a href="https://thevx.io/campaign/operationalising-t1/" data-link-source="tiny"> ValueExchange study</a>&nbsp;found that not a single&nbsp;</span><span style="font-size: 16px;">Asia-Pacific based financial institution was executing their T+1&nbsp;</span><span style="font-size: 16px;">plans, nor had anyone in the region even developed a concrete&nbsp;</span><span style="font-size: 16px;">T+1 project funding request</span><sup>4</sup><span style="font-size: 16px;">. The study also revealed that&nbsp;</span><span style="font-size: 16px;">43% of Asia-Pacific based financial institutions were still in the&nbsp;</span><span style="font-size: 16px;">research and information gathering stages of their T+1 planning&nbsp;</span><span style="font-size: 16px;">efforts, versus 27% of those in Europe and 17% in the US</span><sup>5</sup><span style="font-size: 16px;">.</span></div>
<div>&nbsp;</div>
<div><span style="font-size: 1rem;">&ldquo;The most significant impact is likely to be felt at buy and sell-side firms in Asia and Europe. They will need to make substantial changes to their operating, treasury and client service models to support their client trading in a compressed settlement environment. They will experience the most significant impact, but in many respects are the least prepared and have the most work still to do,&rdquo; said <strong>Bryan Murphy, Global Head of Banks Sales, Securities Services, Citi.</strong></span></div>
<div>&nbsp;</div>
<div>&nbsp;</div>
<div><img style="display: block; margin-left: auto; margin-right: auto;" src="/rcs/citigpa/storage/public/icpublic/Article_Graph3.JPG" alt="" width="510" height="345" /></div>
<div>&nbsp;</div>
<div>
<div>&nbsp;</div>
<div><span style="font-size: 1rem;">By shortening the settlement cycle from T+2 to T+1, market participants trading US equities will have much less time between trading and the start of the settlement cycle to perform post-trade processing<sup>6</sup>. As things currently stand under the T+2 model in the US, the trade allocation and affirmation process takes place at 1130AM Eastern Time (ET) on T+1. Following the introduction of T+1, trade allocations will be brought forward to 0700PM ET on trade date, with a 0900PM ET on trade date cut-off for affirmations.</span></div>
<div>&nbsp;</div>
<div>&nbsp;</div>
<div><img style="display: block; margin-left: auto; margin-right: auto;" src="/rcs/citigpa/storage/public/icpublic/Article_Graph4.JPG" alt="" width="747" height="579" /></div>
<div>&nbsp;</div>
<div>&nbsp;</div>
<div><span style="font-size: 1rem;">The diagram also highlights the timing challenges facing financial institutions operating in Europe and Asia-Pacific as it relates to allocations, affirmations and securities lending transactions. As the diagram shows, implementation of T+1 will mean financial institutions will have 16.5 hours less time to process allocations; 14.5 hours less time to process affirmations; and 18 hours less time to process securities lending transactions.</span></div>
<div>&nbsp;</div>
<div><span style="font-size: 1rem;"><em><strong>What are some of the operational challenges market participants will be facing? And how can financial institutions navigate the T+1?&nbsp;</strong> </em></span><strong><span style="font-size: 1rem;">Click the full report to find out.&nbsp;</span></strong></div>
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<div><span style="font-size: 0.875rem;"><sup>1 </sup>Citi &ndash; Securities Services Evolution 2022</span></div>
<div><span style="font-size: 0.875rem;"><sup>2 </sup>DTCC &ndash; FAQs</span></div>
<div><span style="font-size: 0.875rem;"><sup>3 </sup>ValueExchange &ndash; Operationalizing T+1</span></div>
<div><span style="font-size: 0.875rem;"><sup>4 </sup>ValueExchange &ndash; Operationalizing T+1</span></div>
<div><span style="font-size: 0.875rem;"><sup>5 </sup>ValueExchange &ndash; Operationalizing T+1</span></div>
<div><span style="font-size: 0.875rem;"><sup>6 </sup>AFME &ndash; September 2022 &ndash; T+1 Settlement in Europe: Potential benefits and challenges</span></div>
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  In February 2023, the SEC confirmed that T+1 would go live on May 28, 2024. The implementation of T+1 could potentially be quite complicated, as it will force market participants into making material adjustments to their existing operating models and underlying technology systems. With T+1’s deadline rapidly approaching in the US, the window for preparations is getting narrower.

T+1 — A race against time

On 13 March 2023 the Central Bank of Ireland (Central Bank) published Consultation Paper 153 — Enhanced Governance, Performance and Accountability in Financial Services (CP153), which consults on key aspects of the implementation of the Individual Accountability Framework (IAF), including the publication of draft Regulations and Guidance. In addition to the IAF, the draft Regulations and Guidance seek to provide clarity in terms of the Central Bank’s expectations for the implementation of three aspects of the IAF: the Senior Executive Accountability Regime (SEAR), the Conduct Standards and certain aspects of the enhancements to the Fitness & Probity Regime. CP153 follows on from the enactment of the Central Bank’s IAF Bill 20224, which was signed into law on 9 March 2023 by the President of Ireland and became the Central Bank IAF Act 2023.

<p style="margin: 0in; font-size: 11pt;"><span style="font-size: 24px;">On 13 March 2023 the Central Bank of Ireland (Central Bank) published Consultation Paper 153 &mdash; Enhanced Governance, Performance and Accountability in Financial Services (CP153), which consults on key aspects of the implementation of the Individual Accountability Framework (IAF), including the publication of draft Regulations and Guidance.</span></p>
<p style="margin: 0in; font-size: 11pt;"><span style="font-size: 11.5pt;">&nbsp;</span></p>
<p style="margin: 0in; font-size: 11pt;"><span style="font-size: 16px;">In addition to the IAF, the draft Regulations and Guidance seek to provide clarity in terms of the Central Bank&rsquo;s expectations for the implementation of three aspects of the IAF: the Senior Executive Accountability Regime (SEAR), the Conduct Standards and certain aspects of the enhancements to the Fitness &amp; Probity Regime.</span></p>
<p style="margin: 0in; font-size: 11pt;"><span style="font-size: 16px;">&nbsp;</span></p>
<p style="margin: 0in; font-size: 11pt;"><span style="font-size: 16px;">CP153 follows on from the enactment of the Central Bank&rsquo;s IAF Bill 20224, which was signed into law on 9 March 2023 by the President of Ireland and became the Central Bank IAF Act 2023.</span></p>

Central Bank Consults on Implementation of the Individual Accountability Framework

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Welcome to the latest article in our ‘Transformation is Inevitable’ series, where we provide insights based on our on-going analysis of the complex, changing and ambitious regulatory policy environment, evolving customer needs, as well as advancing technology. In earlier articles we looked at the future of work and sustainable finance, the potential risks arising from the increasing use of cloud outsourcing and how regulators adjusted their agendas to tackle the impact of COVID-19 on financial services, amongst others. In this article, we consider the key regulatory themes to watch out for in 2023 and beyond. Certain themes will be familiar, whilst others may only just be entering the peripheral scope for the asset management industry.

<p style="margin: 0in; font-size: 11pt;"><span style="font-size: 24px;">Welcome to the latest article in our &lsquo;Transformation is Inevitable&rsquo; series, where we provide insights based on our on-going analysis of the complex, changing and ambitious regulatory policy environment, evolving customer needs, as well as advancing technology.</span></p>
<p style="margin: 0in; font-size: 11pt;"><span style="font-size: 16px;">&nbsp;</span></p>
<p style="margin: 0in; font-size: 11pt;"><span style="font-size: 16px;">In earlier articles we looked at the future of work and sustainable finance, the potential risks arising from the increasing use of cloud outsourcing and how regulators adjusted their agendas to tackle the impact of COVID-19 on financial services, amongst others.</span></p>
<p style="margin: 0in; font-size: 11pt;"><span style="font-size: 16px;">&nbsp;</span></p>
<p style="margin: 0in; font-size: 11pt;"><span style="font-size: 16px;">In this article, we consider the key regulatory themes to watch out for in 2023 and beyond. Certain themes will be familiar, whilst others may only just be entering the peripheral scope for the asset management industry.</span></p>
<p style="margin: 0in; font-size: 11pt;"><span style="font-size: 16px;">&nbsp;</span></p>

In this series, we provide insights based on our on-going analysis of the complex, changing and ambitious regulatory policy environment, evolving customer needs, as well as advancing technology.