Regulation: overcoming the challenge

In Europe, most banks have already implemented Basel II. The next step is complying with Basel III, which has significant add-ons compared to its predecessors – including much higher capital and liquidity requirements – specifically shining a torch on the so called global systemically important financial institutions (GSiFis). In the US, the Basel III compliance process is further complicated by the concurrent implementation of the Dodd-Frank financial-overhaul legislation.

Regulations these days are coming in faster than in the past, some within just 15-18 months. They require more complex, frequent and granular reporting. Effectively, regulators are asking the banks to share with them the same type and level of information that they would show to their top management.

This poses a challenge for banks. They have to implement new processes in shorter timeframes, while still maintaining business as usual. Many banks are still using very old technology solutions to create and manage their regulatory reporting and compliance.  As the changes get more complex and start touching whole new business areas, implementing them becomes increasingly difficult, thus increasing delivery time and costs.

We see banks suffering from data overload.  Siloed data repositories, legacy systems, inflexible and hard coded reporting programmes are the reality in most banks. Off-line spreadsheets and other manual records are still often the primary source of information, especially for liquidity risk management. This issue is particularly pertinent at smaller bank subsidiaries as many of them still rely on spreadsheets for their operations.

So is there a way for banks to report in a timely and cost effective manner?

A harmonised approach

A flexible approach to support changing regulatory requirements is vital. Banks should be seeking to harmonise the data gathering process to enable this to be done efficiently, irrespective of geography.  Regulatory reporting and compliance solutions should work across jurisdictions.

Forward thinking institutions will use technology investments to their own advantage. Meaningful regulatory data can add value to management decisions, help manage risk and improve market positioning. In this way, increased information demand can also become a revenue opportunity.