Tax Professionals can be Actors Too?

Posted by Kelley Lear on Sep 6, 2011 | 0 comments

Tax Professionals can be Actors Too?

Has it been a year already?  The Dodd-Frank Act first anniversary….ahhh, how exciting.  Are you lifting your glass to toast to it’s enactment, or are you slugging down that drink to try to forget?  I just finished watching and listening to a great video (global panel discussion) just shared by Deloitte called “The Dodd-Frank Act: Looking Back, Looking Forward”.  They introduce the video with the following characterization of the Act:    “…is an enormous and far-reaching act that has been loved and loathed from the moment it was conceived to today. Its place in history is a matter of opinion; its impact a matter of intense debate”.  The interesting thing about this 50 minute video is that the Deloitte team actually took their global professionals and assigned them to “character parts” to role play in discussing the Act and its perceived impact and future standing in the global economic and business environment.  The “players” included the CEO of a major U.S. bank, the CEO of a French bank, a UK regulator, a UK government legislator, a Bejing regulator, an EU regulator, and a US policy analyst.   I personally typically read issues from different angles and love to get differing opinions that cross cultural, political, industry, and other unique sylos.  So, in watching this video, I thought the perspective views were characterized rather nicely. 

Thought I would summarize and share just a few of the perspectives a bit here:

U.S Bank CEO perspective:

  • We agree with the need for greater transparency and the need to mitigate another serious financial crisis.
  • We think that the “FSOC” – Financial Stability Oversight Control is a good thing…one way to get coordination of overall regulatory agencies.
  • But, do the pluses outweigh the negatives?  The cost and complexity may make us less competitive in the global marketplace. 
  • With over 2,000 pages of complex regulation, can we have any hope of getting it right, it will cost us hundreds of millions of dollars per major financial institution just to figure it out and comply.  And, we don’t know what the long term impacts will be.
  • We will be “penalized” with greater capital requirements, liquidity requirements and more oversight than ever before (so, SIFI’s will be penalized).
  • With our global environment and global economy, and essentially different rules across all industrial and emerging economies today, we are concerned that we will forever be on an “uneven playing field” that will seriously undermine our competitiveness in the market.

Paris Based Global Bank CEO perspective:

  • We will need to adapt our organization to respond to over 100 national regulatory differences that we will need to understand, analyze and to determine what steps we need to do in terms of allocating capital and resources to take advantage of “regulatory arbitrage”.   We do not have a regulatory level playing field out there and this will continue to be costly and challenging for us.
  • This  Act will prove to be an enormous cost to our company, our customers and the society as a whole.
  • Starting with SOX, now with Dodd-Frank and FATC (the Foreign Account Tax Compliance Act), we are seriously constrained and threatened by the “intrusive” exportation of the U.S. regulatory system.  In fact, FATC may have us even more concerned at the moment…

US Regulator perspective:

  • 2000 pages is what is expected when we have such a complex and overarching problem and crises to mitigate.  We expect to work on this through public comment and try to heighten the prescriptive nature of the language by working with corporate leaders. 
  • Yes, this will be costly and negative in the eyes of U.S. and foreign banks who are not keen on increased transparency and compliance, however we cannot, and will not, run the risk of another economic crisis.

UK Regulator perspective:

  • Due to the significance, depth and global reach of the economic crisis, we would expect this Act to be comprehensive, and as far reaching and complex as the risk we are mitigating.  Our people expect immediate and significant action and we are doing it.
  • The UK is also acting rigorously to mitigate risk and try to align the Bank of England with the FDIC and other U.S. regulatory movement. 

EU Regulator perspective:

  • We are satisfied only in seeing US and EU convergence with respect to capital requirements, liquidity and derivatives.
  • We are still concerned that regulatory arbitrage is a factor here with different global entities falling under different rules.  Even in the U.S., certain entities can be classified under varying categories, and therefore will result in different compliance.

US Policy Analyst perspective:

  • “We are safer but not safe.”
  • We are better off than we were in 2008 due to two main points:  1. The increased collaboration of regulatory bodies.  2. This is the first time that we have taken an “over the horizon” view and introduced new and real analytics to the mix.

Just lifted up my takeaways from the discussion panel.  Watch it for more detail.  What do you think?  How do you weigh in?

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