Drawing closer to a digitised regulatory world

Mark Kane

By Matteo Chiarelli, Mark Kane


Since the financial crisis in 2008, the cost, complexity and scale of regulatory reporting has grown significantly. The Bank of England’s (BoE) recent Future of Finance report estimated that regulatory reporting now costs the financial services industry up to £4.5bn per year. At a recent webinar we held with UK Finance, 85 per cent of industry professionals on the call told us their largest regulatory challenges stem from the complexity of interpreting data, mapping data or data quality. And some firms are submitting as many as 40 consolidated reports on liquidity alone.

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


With such costs, complexity and scale only continuing to grow, current approaches to regulatory reporting are unsustainable. To prepare for the future, firms must act now.

Balance complying today and preparing for tomorrow

As regulatory reporting efforts increase, with over 300 million pages of regulation in existence now, firms need to find ways to both adjust to current regulation and get ready for future iterations. In our experience, there are three principles that help firms set an appropriate structure to manage current regulatory requirements, smoothly incorporate new regulations and data, avoid errors and focus data integration:

1. Develop stronger capabilities in managing your data

Many firms adopt a piecemeal approach to managing data. By identifying robust business objectives, strong data processes and having correctly used and consistent data governance in place, firms can align internal data management and standard data definitions to collate the correct information in a single repository. Robust data management practices provide firms with peace of mind, ensuring the information they provide is without damage, consistent and of good quality.

2. Refresh reporting frameworks and controls for legacy processes and new regulations

Establishing clear roles and responsibilities through a well-documented and regularly updated governance operating model and terms of reference, including accountability and performance management, can help drive reporting quality. This leads to operational benefits as employees are free to focus on other deliverables such as active oversight, issue identification and mitigation.

3. Create a RegTech strategy and explore RegTech capabilities

RegTechs are shaping how firms prepare, submit and analyse data, with more than 70 vendors providing regulatory reporting solutions, covering interpretation, data transformation and submissions. Such technology-based solutions can help firms minimise manual interventions. So, firms should identify an area to focus on (compliance, identity management, risk management, regulatory reporting and/or transaction monitoring), understand the area’s current inefficiencies and define how a RegTech could help cure those headaches. The strategy must be realistic and ambitious, and should inform the assessment of which providers are out there and how their capabilities match the firm’s needs.

Engage with industry-wide initiatives to benefit from collective industry efforts

Making regulatory reporting more manageable will take a collaborative, cross-industry effort. RegTech vendors and regulatory networks are focusing on improving data quality, refining data models and paving the way for better data standards. For example, the BoE and Banks’ Integrated Reporting Dictionary (BIRD) are driving the transformation of data collection and regulatory reporting. Similarly, the Global Financial Innovation Network (GFIN) has a regulatory reporting workstream that aims to highlight the need for principles of common data standards.

Financial institutions must be aware of these initiatives and participate actively by joining events, responding to discussion papers for such initiatives and actively sharing their own pain points with incumbent measures.

New and emerging technologies will soon revolutionise regulatory reporting

As firms develop a more strategic mindset to regulatory reporting, the introduction of new technology will have the potential to revolutionise the regulatory reporting process. To assist firms in this area, the Financial Conduct Authority and BoE are running the Digital Regulatory Reporting (DRR) initiative, which PA contributed to with a set of recommendations in the pilot phase report.

So, firms must be ready to integrate these quickly by creating an agile environment. They must explore the art of the possible and determine what new technologies are available and how they can benefit from new capabilities.

  • Semantic technologies

Semantic technologies provide a way for computers to understand both the context and meaning of data by linking it together in structures, presenting a good opportunity for regulators to build on a common data model and taxonomy.

  • Natural Language Processing

Natural Language Processing uses algorithms to understand the synonyms and diverse possible sentence structures of ordinary speech. That means it can understand what someone’s saying without relying on them using specific words and phrases. The technology is advancing quickly and will soon reach a point where they can significantly cut the time and costs of regulatory reporting.

  • Architecture Models

Architecture models can move firms away from ‘pushing’ regulatory reports to regulators, instead allowing regulators to ‘pull’ information directly from firms’ datasets through APIs. This would cut the time required when going back and forth between regulators and firms.

Preparation for the future starts now

The regulatory reporting environment is moving quickly, with more changes to come. With the sheer quantity of new regulation coming into play, and costs and complexity spiralling as a result, tactical fixes alone aren’t enough. Firms must start acting with a long-term strategic mindset now to fully exploit innovative technologies and industry-wide initiatives, be at the forefront of industry best practice and produce synergies.

About the authors

Matteo Chiarelli Financial services expert
Mark Kane
Mark Kane PA financial services expert

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