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Regulatory transparency - the holistic approach?

In my recent blog, I pointed out that regulations are constantly changing, becoming more complex. 

Global banks will find that proving transparency across multiple products to the regulators is a big challenge. All tier one banks operate with at least some legacy systems and some manual data sources, and can’t deliver all the required information in real time.

But transparency is key. Post-2008 liquidity crisis, global regulators are prescribing a series of new, more in-depth, regulatory returns. They clearly feel that the information would help banks operate more effectively, and are unwilling to relent on the new requirements.

The point of these new regulatory returns is to offer a more holistic view of the risks undertaken by institutions, not just to disclose positions. Banks need be able to prove two things:

  1. That the decisions and investments they have made are prudent
  2. That they understand the regulatory impact at the time of making trades 

Banks will have to closely work with regulators, building trust and helping them understand how they run their business.  To help overcome these challenges and become more transparent, banks will need to harmonise their data collection and where possible automate manual processes.

Benefits from regulation 

There is a real positive side to this too. In moving towards a fully global, transparent data framework, banks will find opportunities. What banks need is a comprehensive view of their business situation, on a national and global scale. They will have to make sure that all data is clean, traceable and available in real time – this can be done by implementing a single platform, where they can collect all data.

If banks invest in an open architecture with an intelligent data model for regulatory reporting, they will find that they will be able to meet the challenges outlined here – and the impact will be to regain the public’s trust and, ultimately, secure more clients. They will be able to use the regulatory data they produce to better manage risk and improve their business decisions. And they will, of course, future poof their business against new regulations. 

As a commentator on one of my post noted, there are many difficulties and challenges for banks that report across multiple jurisdictions. He also noted, though, that by moving towards full Basel II (Pillar II and Pillar III) compliancy, many will find the transparency that they’re looking for – and I agree. Just in trying to achieve total compliance and transparency, banks will find real benefits.

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