In today's global regulatory environment, it is difficult for international banks and other financial institutions, with extended enterprises, to effectively manage their corporate and regulatory compliance efforts. With the currently ongoing introduction of a major new European Union ('EU') banking and financial legislation this becomes more and more valid for the ones operating in the single European marketplace. Moreover, it is a clear policy of the European Commission in this area to lead "regulatory dialogues" with the USA and Switzerland on the equivalency of “supervisory objectives" in a way to find synergies in an increasingly globalized world market.
The newly adopted and upcoming EU banking and financial legislation involves the following areas and associated main acts: banking (see Figure 1), investment services and market infrastructures (see Figure 2), insurance (see Figure 3), retail financial services (see Figure 4), covering regulatory and prudential rules for credit institutions, investment firms and financial conglomerates. The main objectives behind such crucial reforms involve, among others, the following: to achieve soundly regulated and safe financial institutions through the establishment of a common framework ensuring prudential oversight and consumer protection all over the European internal market; to achieve an integrated market for banks and financial conglomerates in the EU; to make it more difficult for transactions to mask money laundering activity; to make financial markets more efficient, resilient and transparent and to strengthen the protection of investors (MiFID 2).
Figure 1. Main new and upcoming EU banking legislative acts:
Figure 2. Main new and upcoming EU investment services and market infrastructures acts:
Figure 3. Main new and upcoming EU insurance legislative acts:
Figure 4. Main new and upcoming EU retail financial services legislative acts:
Despite the anticipated impact of the above new and upcoming EU legislation on the business landscape, enforcement officials are likely not to be giving banks and other financial players any breaks for improper behavior.
Another key area of your compliance program to be affected by the new EU legislation will be anti-money laundering measures. The fourth EU anti-money laundering Directive (Directive (EU) 2015/849 on the prevention of the use of the financial system for the purposes of money laundering or terrorist financing) took effect from 26 June, 2015. It imposes various compliance requirements on businesses (see Figure 5 for brief guidelines).
Figure 5. New EU anti-money laundering legislation:
While striving to ensure maintenance of a regulatory compliance and risk mitigation management program, and to monitor and review it on a regular basis, banking and other financial institutions may incur disproportionate compliance costs in the process of outsourcing such non-core activities to external service providers.
In this connection, there is a clear trend towards an ever increasing legal process outsourcing ('LPO') demand in Western Europe. Outsourcing your corporate and regulatory compliance management to a secure and reputable LPO provider located in Southeast Europe ('SEE') is an innovative approach that would provide you with strategic competitive advantages such as:
(i) Achieving significant cost reduction of 40% to 60% compared to the respective fee rates for identical services to be charged in the rest of Europe and the USA, while enjoying first-class quality services.
(ii) Using your preferred type of pricing model (hourly rate, or project / value-based fees) depending on your specific needs.
(iii) Exploring standard process and automation, innovative IT solutions and other innovative legal process reengineering for delivering you cost-efficient and better solutions.
(iv) Exploring the deep talent pool available in the SEE region will help you achieve best performance while working nearshore in almost the same time-zone as in Western Europe. For example, Bulgaria possesses a strong labour pool suited to the Business Process Outsourcing ('BPO') sector with in excess of 60,000 students graduating annually from all Bulgarian universities. Approximately 50% of the graduates obtain degrees in majors suitable for the needs of the BPO industry. The labour pool also provides a strong international language base, with 98% of the students enrolled in secondary school in Bulgaria studying a foreign language and 73% at least two foreign languages.
(v) Focusing on your core activities and spending more time with your clients.
(vi) Using the deep roots, knowledge of civil law and all EU languages and cultures necessary to address the nuances of local markets in Europe.
Therefore, it is anticipated that the ongoing introduction of a brand new EU banking and financial legislation would boost LPO development in SEE given: (i) the need for banks and other financial institutions to adapt their European operations in strict compliance with it; and (ii) the significant growth potential in the SEE Region of the LPO sector and the BPO industry as a whole. By the way of example, Bulgaria is ranked as the best outsourcing destination in Europe in 2015, and 3rd worldwide for BPO and shared services (Cushman & Wakefield, rating for 2015 - see Figure 6).
Figure 6. Cushman & Wakefield, BPO Rating, 2015:
In order to determine which countries to include in the Index, Cushman & Wakefield has used the Foreign Direct Investment Markets (www.fdimarkets.com) and Tholons databases. The next stage has determined the parameters to assess each country against one another. The key parameters that any BPO operator should consider are those related to three principal criteria: Costs, Risks and Conditions, as follows:
Cushman & Wakefield, BPO Rating for 2015:
First LPO Europe is a secure LPO provider located in the EU (Sofia, Bulgaria), delivering first-class quality work with multilingual capabilities. We are experienced and well-equipped to help investment banks, credit institutions, private equity firms, hedge funds, insurers and other financial institutions adapt to the EU regulatory changes. Our complete compliance platform is designed to deal with all your compliance needs, regardless of how small. Our subject matter experts can provide you with the detailed guidance to apply the new EU banking and financial legislation, based on your institution’s unique risk profile. For more details, visit our website http://www.rslaw.eu/ and contact our Executive team:
Vesselin Boianov, Partner, E: v.boianov@ic-see.com
Zlatina Ruseva-Savova, Partner, E: zruseva@rslaw.eu
