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Regulatory Reporting: Facing the Technology Challenges of Today

Friday 13 January 2017

Following on from the major financial crisis of 2008 and the resulting global recession, governments across the world have established tighter financial regulations in order to prevent and mitigate a similar situation occurring in the future.

Financial regulators have been made accountable for the health of the banking and finance sector and thus play a crucial role in the setup, development and safety of the banking system, ensuring its continuity and profitability.

Although obviously more in the spotlight now, regulatory reporting is not a new concept. In the UK, the financial services sector was regulated by the Financial Services Authority but was dissolved following public criticism after the financial crisis. In its place today is the Prudential Regulation Authority (PRA) and Financial Conduct Authority operating (FCA) on a “twin-peaks” basis with regards to regulating the industry.

The reason for the split was so that the regulatory authorities could meet the regulatory demands of the financial services market. The PRA relies heavily on judgement and is very much “forward-looking”; they have been made responsible for providing prudential regulation for banks, building societies, credit unions, insurers and major investment firms. Whereas the FCA provides conduct regulation in retail, wholesale, financial markets and the infrastructure that supports those markets.

Why regulatory reporting is needed?

Built on lending, the nature of the financial services market means that organisations such as banks, building societies, insurers, etc. rely on having a healthy market in which to operate in, without this their services and ultimately their profitability suffers.

The data that regulators collect from financial services organisations serves to provide regulators with an indication of an entities’ financial health and the identification of any early on-set issues so that prompt preventative action can be taken. The act of setting and implementing monetary policy is also governed based on the data provided.

Technology challenges facing financial institutions

By tightening regulations, financial institutions are having to evolve in order to keep pace with the changing legislation and financial reporting requirements laid out by regulators. Existing systems in use at financial institutions aren’t equipped to meet the constantly evolving reporting requirements set out by regulators while at the same time meeting their own internal reporting needs. The main technology challenges financial organisations need to solve include:

It is crucial that these technology challenges are fast-tracked and solved quickly as regulators have stringent deadlines which govern when an institution needs to submit financial reports. If missed, the organisation will receive a financial penalty to deter late or inaccurate report submissions.

A practical solution – search-powered analytics

To meet these evolving reporting requirements, financial institutions will need to identify their legacy reporting systems and replace them with modern alternatives that are scalable to meet the requirements of the regulatory body now and in the future.

Our recommendation would be to implement a reporting system built on search-engine technology as these solutions can process data and requests quickly, can integrate with multiple systems seamlessly and can scale easily to the needs of the organisation.

Our solution CXAIR is a business intelligence tool built on search-engine technology and has recently gained popularity in the banking & finance sector because of the changing financial reporting requirements set out by regulators.

With CXAIR, financial institutions can expect to benefit from:

The growing regulations caused by the financial crisis of 2008 has provided numerous technology challenges to financial institutions who are now required to submit several reports to regulators in a variety of formats. To stay with the pace and meet future requirements these organisations need to evaluate their systems and identify those legacy systems that need to be replaced or upgraded. If not, they put themselves at risk of financial penalties because of missed deadlines or incorrect data submissions.

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