Deloitte has published its Financial Markets Regulatory Outlook for 2018, predicting that the sector faces another formidable set of regulatory and technological challenges.

The deadlines for MiFID II, PSD II, GDPR means that some firms will have to adopt tactical approaches to compliance, with the inevitable pressures on technology to deliver solutions, as well as human cost.

David Strachan, partner and head of Deloitte’s EMEA Centre for Regulatory Strategy, says: “New technologies will continue to provide opportunities. But the same technologies also pose risks for firms whose business models will be challenged, and for consumers where the use of technology or their personal data is not well understood or controlled.”

The report identifies several cross-sector issues of strategic significance for financial services firms operating in Europe. For example, making best use of customer data is increasingly seen as a strategic imperative for financial services firms. Nevertheless, with the implementation of PSD II and GDPR amid increasing concerns about the use and protection of personal data, firms can expect much greater supervisory scrutiny of their systems and controls in these areas. This will potentially lead to substantial penalties if data privacy is compromised. Rising concerns about cyber threats add to the complexity in this area.

For insurers, the report foresees the soft cycle is here to stay and technology continuing to disrupt traditional business, with Andrew Bulley, insurance partner in Deloitte’s EMEA Centre for Regulatory Strategy, saying: “The insurance industry is grappling with continuing regulatory change, technological disruption, a persistent soft market, and a continuing low yield environment.”

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