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Making ISO 20022 work for you: regulatory compliance

We at SWIFT would like to hear about your ISO 20022 plans, experiences and questions. Starting today and leading up to Sibos, we will launch a series of weekly blogs on Finextra called "Making ISO 20022 work for you", each focusing on a specific ISO 20022 business case and implementation aspect. All blogs will end with an open-ended question. The purpose is not to start an online discussion, but rather to collect your feedback, some of which will be presented during our Standards Forum at Sibos in Singapore, held from 12 to 15 October 2015. The first blog in our series deals with regulatory compliance. Thank you in advance for you participation.

 

For regulators to feel confident about the correct interpretation of data elements in reporting requirements, and for regulated institutions to equally be confident about compliance with reporting requirements, the financial world needs a single, authoritative library of financial data definitions, to which data components of every relevant transaction can be traced.

As it happens, such single standard set of definitions exists today. ISO 20022 defines the platform for the development of financial message standards. Its business modelling approach allows users and developers to represent financial business processes and underlying transactions in a formal but syntax-independent notation. These business transaction models are the "real" business standards. The data model which lies at the heart of ISO 20022 is a potential reference point to help regulators and market overseers to require, harvest and interpret data which is unambiguous, clear and equivalent from one source to another. This makes the standards an excellent resource through which to ensure that data elements specified in a regulatory reporting context are interpreted consistently by implementers.

ISO 20022-based messages are quickly becoming recognised as the natural transaction language of market infrastructures, which means that individual market participants are already embedding them into their core transaction processing systems. Reference data standards, such as the LEI, are used within and beyond financial messaging, to define the context within which transactions take place in a similarly uniform manner.

Understanding how standards can help the community requires some familiarity with the content, governance, real-world implementation and limitations of standards; and likewise, the standards community needs to learn about regulatory practices in order to provide relevant assistance. This leads us to ask Finextra members the following question:

Do you think ISO 20022 can help to enable regulatory compliance? If so, what will it take to make it happen?

 

 

 

 

 

 

 

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Comments: (3)

A Finextra member
A Finextra member 02 September, 2015, 17:092 likes 2 likes

Yes. Standards are very important for uniform interpretation. Having said that, the future of regulations will be global, as opposed to what it is today. A good example is Basel standards or IFRS. ISO20022 has the potential to be one such global standard.

Robert Blair
Robert Blair - Self Employed - Tampa FL 05 September, 2015, 16:461 like 1 like

As the next generation financial services messaging standards, ISO20022 schema are uniquely positioned to respond to a variety of businesss and regulatory requirements.  Greater number of data elements, increased field lenghts and schema unique to ISO20022 all add up to:

  • a field for every piece of data,
  • sufficient space to carry it,
  • a complete inventory of message schema facilitating commmunication between counterparties, market infrastructures, and regulators.

Upping the game of the financial services industry will require:

  1. adoptoin of ISO20022 (well underway as the mApp reflects),
  2. evolution of market practice and notably harmonization to reduce unwanted variants and variations.  And ultimately
  3. global thinking and a common respone to common issues and requirements (including regulation).
Steve Goswell
Blog group founder
Steve Goswell - TBA - San Francisco 05 October, 2015, 05:18Be the first to give this comment the thumbs up 0 likes

Simple answer to the first question is Yes. It can, and it already is.  It is no coincidence that the US Govt is mopping up some formidable standards talent in the shape of Mssrs. Stowsky, Brown, and Nichols.

The one missing link in 20022 from a regulatory compliance perspective is the lack of support for derivative instruments. We've tried for many years to bring FpML into the fold.  The dialog continues, but with no real concrete results so far. 

Perhaps a regulator with a big enough stick will force the issue.

 

Paul Miserez

Paul Miserez

Standards Department

SWIFT

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04 Apr 2013

Location

La Hulpe

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This post is from a series of posts in the group:

Standards Forum

The Standards Forum is the place where business and standardisation meet. This group would like to facilitate and encourage dialogue around standardisation in the financial industry, and share views, insights and updates on how financial standards can contribute to reducing cost and increasing efficiency when tackling today's challenges such as automation, compliance, and regulation.


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