Regulation and tax pressures to hit the securities industry in 2012

HSBC and Standard Chartered concur that banks in Asia will have to brace for a depth of regulatory change and evolution of tax regimes this year.

ABF: What are critical issues you face in 2012?

Standard Chartered: Giles Elliott, Global Head of Product Management, Investors & Intermediaries
A key issue would be the depth of regulatory change in general across the securities industry. Clients are facing more regulation and this is driving demands for increased regulatory reporting as well as for changes in contractual conditions. Custodian providers are facing equal pressures and will need to review carefully how they absorb any new increases in responsibility within existing commercial frameworks.

HSBC: Ian Banks, Head of HSBC Securities Services, Asia
One of the critical challenges all securities services providers will have to deal with in 2012 and beyond is the evolution of tax regimes in both developed and emerging markets. Legislations like FATCA, withholding tax regime changes in emerging markets will need large scale change programs to be implemented across multiple products and client sectors.

Asia is also seeing a faster growth of the middle class than any other region. The World Bank estimates show the global middle class growing from 430 million in 2000 to 1.15 billion in 2030. But more striking is the geographic distribution of this. In 2000 developing countries were home to 56% of this global middle class, but by 2030 this figure is expected to reach 93%. China and India alone will account for two-thirds of this expansion. This does present the huge opportunity of a new pool of investment but this comes with the note of caution that this will also mean new heights of investor protection is also needed.

The various parties within the industry are consulting on AIFMD to assess scenarios of how liabilities may be rebalanced between not only service providers but also other market participants.