Governance, risk & compliance 30%
Banks who say London has the most favourable regulatory regime for financial services, ahead of New York (26%) and Singapore (18%). Kroll
has reduced the number of sources required to service data requirements, along with demarcation of trusted sources, so reducing time-to-market for new requirements,” he notes. “The bigger change is automation of manual tasks in the reporting processes themselves, which has enabled daily reporting at enterprise scale.”
Cloud technologies, in particular, can help rapidly scale up the computing power required for regulatory reporting. That access to processing power and resilience is a game-changer. “We are able to store, easily access and process large amounts of information within an architecture that would have necessitated many environments using traditional on-premise patterns, eliminating the additional processing steps this would require,” Speight explains. “We are also able to implement copies of these environments rapidly in different locations giving us the ability to respond quickly to external factors and ensure we can keep these processes operating.”
Lian makes a similar point. “Cloud-based solutions have the potential to bring vastly improved performance and the added benefit of frequent and easy updates in the fast-changing regulatory landscape,” he says. “We’re deploying cloud-based solutions for many data warehousing, calculation and reporting solutions across our footprint.” Further down the line, other technologies also have potential to deliver great benefits, particularly artificial intelligence (AI), machine learning (ML) and robotics, though Lian believes their impact will not be felt immediately. “The technologies are tantalising and have huge potential upside – but realising those benefits in regulatory reporting and compliance is not something we have in our immediate future,” he says. “There are key areas where AI, for example, is making an impact, but there is certainly more scope for progress.”
Can regtech lead to innovation? Given all this, it is unsurprising that regtech is an industry on the move. Among other things, that is clear in the growing number of third-party providers delivering it as an outsourced service. More to the point, these companies deliver the kind of automation that can reduce the time needed to complete regulatory reporting, eliminate human error and, crucially, keep costs under control. To an extent, regulatory reporting is now a fixed rather than variable cost, as businesses can be segmented according to different regulatory regimes, products and approaches to reporting to bring some predictability into the scaling of costs. Nevertheless, banks must still manage that cost.
“I think banks can mitigate some of the cost – and much of the associated operational risk – by looking through to the compliance consequences of new products and businesses at inception and seeking efficiencies in implementation,” says Lian. “Global
30
banks can also benefit from analysis of the costs and benefits of booking locations for certain products.” Internal process optimisation and implementation of new technologies for automation will reduce the cost burden – but there is great potential in outsourcing key processes to specialist providers of regtech. As Speight puts it: “Banks can mitigate cost by de-duplicating data processing pathways, data stores and associated operational processes, partnering with third-party vendors for ‘final mile’ formatting using specific template formats and sometimes systems defined by each regulator where it makes sense to do so, and addressing the legacy application estate we often see for banks.”
Beyond cost control and efficiency, however, some are seeing the emergence of regtech as a chance to innovate more fundamentally across the regulatory reporting process, harmonising relationships between banks and regulators. Regulators could even start to work with more granular data in close to real-time, and this is where the opportunity for innovation lies. “The shift towards fully granular reporting is key here,” emphasises Speight. “Rather than providing aggregated pre-set templates which take significant effort to produce, we will be able to share granular data with our regulators directly, which they can then interpret for themselves. This model will also reduce time-to-market for new data requirements, and in some cases a much more collaborative involvement may be possible, with governance being embedded within our operational processes rather than being implemented after the fact.”
“Unlike other market participants, banks have the advantage of decades of expertise and experience in ‘being regulated’ – everything from the data requirements to interpretations, global inconsistency to international lobbying and regulatory relations,” adds Lian. “If tackled holistically, and with a focus on efficiency and a best-in-class ambition, the ability to take on complex regulation can become a differentiator that can be monetised and give the right firms a competitive edge.”
What is required is a shift in mindset as much as a shift in technology. “Although there is a lot of hard-to- use information flying between banks and regulators, I do believe that some of that data has the power to aid global stability and it remains the industry’s duty to improve,” Lian says. “This also has the potential to be a competitive advantage for innovative organisations.” Soon, regulatory reporting could become more than just a compliance burden. Rather, it could be an opportunity for new technologies and innovation as both regulators and banks move away from prescriptive models towards the goal of real-time reporting. If regulators start pulling data from financial systems rather than having banks pushing it to them, the process could become simpler, faster and more efficient. ●
Future Banking /
www.nsbanking.com
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