Are you ready to embrace digital regulatory reporting?

By Alexander McGill


Regulatory reporting has become a burden for banks and investment firms, which have seen a significant increase in the amount of regulation and regulatory reporting since the financial crisis. This increase has made the complexity, and time demand of submitting regulatory reports grow. Firms compile reports by following instructions that can spread across many interlinking pieces of regulation. For example, the Prudential Regulatory Authority’s Rulebook contains 638,000 words, that’s 77,000 words longer than the English translation of War and Peace. The complexity of the language and high number of cross-references between different parts of the Rulebook make any updates to its regulatory reporting requirements challenging to keep up with and implement.

To help firms overcome these challenges, the Financial Conduct Authority (FCA) and Bank of England are running the Digital Regulatory Reporting (DRR) pilot to explore how digital technologies and tailored processes can streamline regulatory reporting.

If successful, the DRR could transform how the financial services industry understands, interprets and reports regulatory information. Work is progressing at pace, with the International Swaps and Derivatives Association recently announcing the deployment of the ISDA Common Domain Model (ISDA CDM 2.0) to support the FCA’s initiative. The deployment of the ISDA CDM as part of the DRR is intended to help understand how the DRR approach scales across multiple regulatory domains and more specifically the feasibility of firms meeting multiple reporting requirements from the same data set.

Read our review of phases 1 and 2 of the Financial Conduct Authority and Bank of England's Digital Regulatory Reporting initiative


Five steps to prepare for digital regulatory reporting

Preparing for this new era of digital regulatory reporting will take considerable planning. Based on our experience supporting regulators and financial services organisations, we’ve found five steps to help you benefit from these developments:

1. Get your data in order. Assess the maturity of your data capabilities, define an enterprise-wide data strategy and implement a robust data governance framework. This will ensure data is treated as a valued asset and maximise the use of data to make decisions.

2. Move towards an API-driven architecture. Simplify your data architecture, remove data silos and build a central data repository to ensure data is easily accessible and can be effortlessly reported to regulators through an API-driven architecture. This will provide a scalable, configurable and flexible architecture that easily adapts to reporting changes across geographies and jurisdictions.

3. Streamline your processes. Map the current regulatory reporting processes and data sources to identify bottlenecks, simplify current processes and enhance your regulatory reporting capabilities. This will significantly improve the lead times in identifying, collecting and reporting data to regulators.

4. Harness RegTech solutions and emerging technologies. Leverage technologies such as robotics, artificial intelligence, machine learning, natural language processing and distributed ledgers to automate routine tasks and develop advanced analytics so you can make data-driven decisions. This will improve the efficiency and effectiveness of regulatory reporting, while freeing people to do value-adding tasks.

5. Foster data science capabilities. Assess data science capabilities across the organisation to ensure you have access to the talent and skills necessary to deliver. This will enable you to explore options for addressing skill gaps early on, which may include building an in-house data science capability or outsourcing to an external provider.

By focussing on key parts of the regulatory reporting process that are primed for digitisation, financial services firms will not only capitalise on the significant opportunities available to them today, but also ensure they’re ready to embark on the regulatory change journey.

About the authors

Alexander McGill PA financial services expert Alex works with clients across the Nordics, Europe and UK to optimise their approach to non-financial risk management and financial crime prevention. He brings extensive experience working with global banking groups and financial services regulators across the region.

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