As the 13^th anniversary of Lehman Brothers collapse approaches, Matt Smith, CEO of SteelEye, the regulatory compliance and data analytics firm, said: “Financial regulation has evolved enormously since Lehman’s collapsed, yet we still have a long way to go particularly as we embrace the realities of a post-COVID financial market. If we are to take steps to try and prevent another financial crisis of this scale, firms must first take control and ownership of the accuracy of their own data, so that regulators are granted full visibility.”

“What we can learn from past failures and the recent pandemic is that the unexpected does happen, and markets, firms and their staff are too often not prepared enough. So, on today’s milestone, what lessons can we reflect on to ensure our markets remain fair, resilient, and compliant? We believe data and control of data sits at the core of this”

13 Years on from Lehman’s Collapse

“This time 13 years ago the unthinkable sent shockwaves through Wall Street and global financial markets: Lehman Brothers, the world’s fourth largest investment bank at the time, declared bankruptcy. The collapse of the firm kick-started the largest financial crisis witnessed in modern times and became the catalyst for large-scale global financial services reform.”

But how did it get to that point and is the market better off today?

“Complacency was largely to blame. Before the collapse there was a misguided sense of invincibility in the industry – a myth that certain institutions were ‘too big to fail’. The dot-com bubble of the 90s sparked a blasé attitude towards trading on Wall Street and beyond. There was a misconception within the financial world that market dynamics were thoroughly understood. Instead, unsustainable and irresponsible trading behaviour was unknowingly posing greater risk to the global economy than ever.”

“As the crash ripped through economies all over the world, it placed the pressing need for transparency, reform, regulation, and adaptability within the financial system at the very top of the agenda. In the US, Dodd-Frank was introduced and focussed on record keeping and the supervision of swap trading. EMIR in Europe came next, which was slightly more sophisticated than its American counterpart, yet still poorly implemented, leading to the EMIR refit we are rightly seeing today. Since then, and perhaps the most important development in financial regulation, came MiFID II. Its aim was to build on MiFID I, standardise practices across the EU and to ultimately restore confidence in the industry, yet today firms still grapple with MiFID II compliance – particularly around reporting -whilst simultaneously having to keep up with the changing regulatory reporting landscape.”

Are we better off today?

“Firms and regulators have built a good foundation for maintaining efficient, resilient, and transparent markets and have certainly cultivated a culture of compliance. However, 13 years on, complacency still poses a threat and there are countless unknowns that could cause a similar shock to market infrastructure.”