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Regulatory reporting: insights from the experts

How will global regulatory changes impact UK financial institutions? This was the very question we asked at a recent Logica event on global regulatory reporting, held at the British Bankers’ Association (BBA) and attended by a number of tier one financial institutions.

Guest speakers included Simon Hills, executive director at the BBA, Michael Davey, policy specialist at the FSA and Ian Jennings, Director, Bank of America Global Risk Technology.

Simon kicked off the discussion by pointing out that response by the regulator to the last financial crisis was increased liquidity and capital injections and an increase in reporting. The overarching trend he saw was more European regulations being brought in and fewer directives. This will result in individual countries having less control over their finances. As a consequence we will see a more unified European rulebook. This is a positive thing, as financial institutions can more easily streamline their regulatory reporting across the Continent, and centralise their operations. More regulation will change the reporting processes at financial institutions, and they will need flexible and scalable reporting systems to cope with these changes.

The FSA’s Michael Davey, COREP and GABRIEL expert, then moved on to look at some of the specific ways in which new common reporting regulation will affect UK banks. He discussed how the FSA’s online regulatory reporting system GABRIEL has now processed nearly 1.2 million forms. COREP, however, will mean an increase of 200-300% in the workload that mid-sized banks need to undertake. Some existing FSA items will be deleted, with six currently proposed for removal due to overlap with COREP, and three others set to be modified. He also looked at data formats, with the existing XML processes set to be transitioned over to XBRL upload – and online keying no longer an option, largely because of the size of the new forms. These jumps in data volumes and changes in reporting processes mean that banks will need to make major adjustments to, or replace, their legacy reporting systems – especially where they are using bespoke in-house tools.

Bank of America’s Ian Jennings then gave a view from the inside, discussing what he saw as the key opportunities and challenges of the new regulation. Consolidation of regulatory data, an improved dialogue between regulators and banks and the ability to conduct scenario analyses are all great benefits. To realise these, banks will need to implement systems that are sophisticated enough to utilise regulatory data beyond just reporting for compliance. Those who do so will gain a competitive advantage. As regulation is brought in ever faster, though, it’s a real struggle for financial institutions to keep up, especially when they’re required to develop a new system for each piece of regulation. Banks can help themselves solve this issue by implementing a solution that is adaptable enough to report against new regulation rapidly and with minimal intervention.

In my view, to survive and thrive in this new world of regulation, banks need to be forward thinking. They need to have a roadmap in place that takes into account both business drivers and technology requirements. Most importantly of all, they need to ensure their systems are flexible and enable the reuse the regulatory data they produce for their own advantage.

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