Australian financial services companies face significant regulatory challenges next year, a leading consultancy has warned.

“Financial institutions have a comprehensive local agenda to manage following the [Federal] Government’s recent adoption of nearly all recommendations of the Financial System Inquiry,” Deloitte Australia Financial Services Industry Risk and Regulatory Leader Kevin Nixon said.

“While some of these are aligned with, and dependent on, global policy outcomes, there is a significant local body of work through [next year] and beyond.”

He says a Deloitte report flags substantial changes in the way capital requirements are calculated, ongoing reforms to protect capital against losses and pressure to improve and demonstrate good conduct and culture.

“Digital innovation will play a major role in altering the environment for delivery of financial services,” he said. “Financial institutions will continue to face elevated implementation challenges within an ongoing policy environment that has significant strategic implications.”

The challenge for companies is to adapt to the new regime.

“Implementing individual requirements, as well as adapting business strategy to regulatory initiatives, is best done with an understanding of policy intent and future reforms,” Mr Nixon said. “Understanding this in a holistic context is vital.”

Next year the Australian Securities and Investments Commission will have intervention powers on products, power to ban individuals from running entities and stronger enforcement tools for the financial services industry.

The Australian Prudential Regulation Authority will consult on recapitalisation frameworks, capital standards and large exposure draft rules.