Regulatory Outlook 2024: Uncertainty is the Only Certainty in Policymaking

February 16, 2024
  • Investor Services
Adrian Whelan assesses global regulators’ rapid responses to tech disruption, geopolitics and volatility, where industry differs in opinions on the changes, and the importance of seeing both sides to promote growth and safety in capital markets.

The mega trends at play – demographic shifts, technological disruption, deglobalization, geopolitical conflict, and moving to a low carbon future – will continue through 2024. What they mean in practical terms, however, is open to interpretation and the exact speed, scale, and shape of these changes generate diverse opinions from both regulators and throughout the industry.

These differing viewpoints are reminiscent of the famous rabbit-duck illusion in which a rabbit or a duck can be seen, depending on your perspective.

What is certain is that the pace of regulation has increased as policymakers seek ways to ensure market shifts progress in a responsible way. While industry and regulators continue to differ on certain policy issues, mediation and a degree of convergence across perspectives will be necessary to support the safety and growth of capital markets.

Forces Driving a New Investment Paradigm

The context of this regulatory focus lay in the forces driving a new investment paradigm, and the several possible scenarios that exist for asset managers and banks.


Forces driving the new investment paradigm Possible impacts for asset managers and banks
Nations are increasingly focused on achieving self-sufficiency and continued onshoring/ near shoring
  • Slower projected growth
  • More regionalization of economic activity, industries, and sectors
  • Higher curbs on cross border trade and financial services
Interest rate shifts (up and down) expected
  • Focus on interest rate sensitive asset classes with greater upside potential
  • Bonds return to favor?
  • Volatility affords more active management arbitrage opportunities
Volatility and uncertainty are the norm
  • Growth in shorter term investment horizons
  • Undulating markets could bring active investment more into favor
“Year of the Vote” spikes importance of geopolitics
  • Geopolitical risk could have larger impacts across asset classes and on policymaking
Global “mega trends” increase in importance
  • Macro and multi asset funds become more important as uncertainty becomes the norm
  • Thematic investing continues its growth path
Fluctuating liquidity conditions
  • Liquidity and time horizons of asset allocations become a more material investment consideration
Governments challenged by systemic risk
  • Policymakers increasingly concerned about systemic risk (risking-taking, leverage and shadow banking). This could present asset managers with a new form of challenge

A Closer Look: Year of the Vote

More than 2.5 billion people worldwide will go to the electoral polls to elect new governments in 2024, including the United States, United Kingdom, the European Parliament and 20 individual European nations, as well as other large countries like Mexico and Taiwan. These elections and newly formed governments will directly influence country and regional responses to the identified “mega forces”. 2023 saw a discernible increased desire for national self-sufficiency in the face of supply chain, energy and food shortages, and continued struggles against inflation. Political changes will ultimately manifest themselves across global asset management and banking, so it’s an important space to watch.

Regulators Respond Rapidly, Industry Pushes Back

Given the breadth of these driving forces, regulators are moving at the speed of light to address them. Both the speed and volume of proposed change present challenges to asset managers and banks who are already dealing with fundamental shifts to the industry landscape and as such there exists a nervous tension where policymakers and industry materially diverge on issues.

This raises key considerations, including:

  • Moving Too Fast, Too Soon:
    • Regulators are implementing new rules at a fast pace. Industry has expressed its opinion that it often lacks enough time to respond to regulatory consultations and regulators are revisiting existing rules too frequently. However, regulators have responded and noted – post-implementation - there has been nonadherence or poor reporting quality where they feel more frequent recalibrating and reviewing of the rulesets are needed. In short, even as elections might dampen some policy initiatives, new and more rule rewrites should still be expected throughout 2024.
    • Regulations in real time:
      • U.S. SEC’s current volume: With three regulatory drivers in mind, the SEC is expected to adopt 25 proposed rules in 2024.1 In addition, 11 new projects are slated for proposal in 2024
      • EMIR Refit and the E.U. Sustainable Finance Disclosure Regulation 2.0: As policymakers revisit previous rulings, new amendments continue to be shared and industry is left to adjust to each new development
      • Revisions to the E.U. Anti-Money Laundering Directive
  • Rapid Change Breeds Regulatory Divergence:
    • The rapid growth of technology, introduction of new asset classes, and faster information exchange processes have created global capital markets larger and more interconnected than ever. Regulators must regulate new risks that come with these advances. However, a degree of uniformity would help operating models.
    • Regulations in real time:
      • The U.S. move to T+1: This local market initiative has disrupted the entire global financial ecosystem with markets such as the Canada and Mexico following suit: the UK and EU have been obliged to move quickly in the same direction
      • Reassessment of the E.U. ESG rules, including SFDR 2.0, Corporate Sustainability Due Diligence Directive (CSDDD), and ESG policy retrenchment in the U.S.
  • Systemic Risks Remain Center Stage:
    • The macroprudential focus of policymakers has turned to global asset managers as a cause and amplifier of broader systemic market risk. During ongoing consultations and debates, asset managers maintain that fund liquidity of open-ended funds has remained stable throughout volatile periods and the main regulated funds already have efficient liquidity risk management tools. To strike a balance between growth and risk, rules need to be tailored as funds have very different liquidity and leverage profiles. The European Commission’s January report on its macroprudential framework for credit institutions and Non-Bank Financial Intermediaries (NBFIs) seeks to achieve such a balance.
    • Regulations in real time:
  • Focus on Outsourcing /Delegation:
    • Multilateralism appears to be in retreat and firms are increasingly choosing to execute global issues locally. Though global bodies such as FSB and IOSCO continue to influence regulatory paths, convergence could help make globally consistent practices easier for asset managers to implement
    • Regulations in real time:
  • Striking a Balance in Regulating Technology
    • The rapid growth and proliferation of new technologies has left regulators with the difficult decision of deciding when to regulate the use of a particular technology. Regulators and asset managers should strike a balance between controlling activity without stifling growth and innovation
    • Regulations in real time:
      • As details of the E.U.’s Digital Operational Resilience Act (DORA) are finalized in 2024, industry expects ongoing discussions around AI regulations, cloud regulations, a crypto assets regime, digital assets, tokenization, information security, and operational resilience
  • Investor Protection and Participation: Getting the Balance Right
    • While regulators continue to emphasize investor protection, there is a growing awareness that increased participation in capital markets is needed to fund ever growing pension and retirement needs. A balance should be struck between investor protection – and the costs and inefficiencies that come with it – and democratized private market investment and risk-taking.
    • Regulations in real time:
  • Sanctions Screening at the Forefront
    • With continued challenges such as sanctions due to geopolitical tensions, the topic of money laundering and sanctions screening remains a perennial concern for regulators. Monitoring against money laundering and terrorist financing remains an area requiring resource and attention as firms continue to leverage new technology and advanced methods of scamming develop.
    • Regulations in real time:
      • While the E.U. plans to establish an AML Authority, a European AML package including a single rule book has been tabled as progress on AML regulatory harmonization once again takes center stage

What’s Next?

As the mega trends persist, regulators and industry have their work cut out in 2024. Regulators’ response is seen as fast and furious, while industry believes their actions are unnecessary or just too much too quickly. However, with much still open to interpretation, it’s likely that 2024 will be the year of continued dialogue, a degree of mediation, and hopefully convergence on a range of policy issues.

Up Next
Up Next

Three Regulatory Drivers for the U.S. in 2024

Adrian Whelan, Global Head of Market Intelligence, recently sat down with Amy Matsuo, Principal and Leader, Regulatory Insights at KPMG, to discuss the main SEC regulatory drivers for the U.S. market in 2024.

1SEC Plans to Adopt 25 Rules in 2024 (

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