WG-REQ-1670 FIS Horizons 2025 STAGE 1 AH - copy - Flipbook - Page 7
Hogan Lovells
The global financial system is highly dependent on
interoperable systems and is premised on broad
acceptance of international standards, many of which
were developed in response to the global financial
crisis in order to improve resilience within the banking
system. This close co-operation between central banks
and international bank supervisors builds vital trust
and resilience to economic and political shocks. It is
also underpinned by shared acceptance of minimum
international standards and international architecture
for the cross border supervision of international
institutions.
Regulatory friction and divergence are costly to
business, though they can also provide opportunities in
particular jurisdictions. However, some central banks
are concerned that a race to the bottom of international
standards could weaken resilience within the overall
financial system.
Data sovereignty and technological security will also
be under the spotlight. We may see a return to the
uncertainty regarding international data transfers,
particularly if there is any material change to the role
of the US Privacy and Civil Liberties Oversight Board in
monitoring the adequacy of privacy protection. Given
how critical data transfers are for the financial sector,
this could reintroduce significant legal uncertainty.
Foreign direct investment will continue to be subject to
additional national security screening, with different
requirements in different jurisdictions, as states become
increasingly concerned about protecting their economic
sovereignty, potentially adding further barriers to
investment.
Generally, geopolitical dynamics can be expected
to lead to a rise in protectionist economic policies,
new industrial strategies and pro-growth initiatives.
Such initiatives may include much needed reforms to
stimulate capital markets (for instance the European
Union’s Competitiveness Compass) but will also include
direct subsidies and other measures to help grow
markets, in particular in local and global markets of
strategic importance (including energy, technology
and defense).
What is certain is that those businesses who plan and
build their resilience to geopolitical shocks, will be better
able to weather the uncertain storms on the horizon.
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