How To Get On Top Of Compliance
How To Get On Top Of Compliance

Since the financial crisis and with the onset of the global pandemic, the FCA has progressively brought in stricter, more complex governance for financial institutions. Failure to demonstrate appropriate governance, controls, and compliance in their regulatory reporting framework exposes banks to heavy fines. These fines can have both a financial and reputational impact which can and do have a lasting effect on the bank’s bottom line. This subject is in sharp focus following the Prudential Regulation Authority’s (PRA) latest “Dear CEO” letter on 31 October 2019. In this blog, I explore three areas of focus for regulatory reporting and compliance.

High-quality accurate data for reporting

Banks must submit timely, complete, and highly accurate regulatory returns or face the consequences. This is the basis of effective submission.  Simple box-ticking, high-level metrics, are no longer enough and regulators now demand data reviews at a granular level.  This requires investment and focus on the right data held in the bank. It is essential they maintain data quality, process, and technology measures to make sure governance and reporting is supplied accurately and on time. New technology for business intelligence and validation allows full data lineage between the source data and final outputs, but as the old data saying goes “rubbish in, rubbish out”.

A well-defined process with clear points of responsibility and control

To produce quality regulatory reporting, banks have started to reshape their internal processes to reduce the time spent on low-value tasks, focusing instead on the core data. This requires a well-defined workflow with a sustainable, agile approach to regulatory reporting. Doing this allows the banks to enable greater independence and flexibility for individuals and teams who understand regulatory frameworks and can anticipate future changes.

An effective automated workflow should have clearly defined points of responsibility and control, to ensure that all the process steps and timelines are fulfilled. Every task, error, and modification should be tracked, and every approval documented, so each reported figure is easily traced back. The process must be standardised and robust, but flexible enough to update with changes in legislation. The task of ongoing regulatory maintenance is increasingly difficult to do in-house. However, utilising best-of-breed software with automated workflows and AI-capable bots (yes RPA) can bring benefits. One of which is always and automatically being up to date, and compliant whilst allowing staff to continue their main tasks without having to delve through spreadsheets and raw data. The right automated workflow solution does the hard work without the risk of human error.

Technology that makes the reporting process more efficient

Banks have never traditionally been the first to embrace new technologies but that is changing. They have recognised that legacy systems with hard-coded customisations that require updates each time there is a legislation change are not effective. However, it is too expensive to replace these systems and that’s where rip and replace falls down and where “Intelligent Glue”, connecting the legacy systems together to provide AI automation comes into its own. There is a new model where regulatory updates are available and implemented in systems at the earliest opportunity. The updates first occur away from production systems so there is no disruption in day-to-day operations and reporting. Further updates, after testing and validation, are applied with the click of a button. The Platform-as-a-service (PaaS) model delivers significant advantages, taking a portion of the compliance burden away while helping to reduce the total cost of ownership. There are major differences between vendors and products, so assess options carefully. As an example, psKINETIC only works with top providers in the industry and has a technology stack that we have rigorously tested.

Final thought

A well-planned workflow placed into an organisational and technological infrastructure enables data to flow through the organisation safely, smoothly, and transparently and into regulatory reports. In today’s world, it becomes time-consuming and costly to deploy solutions in-house, but the era of cloud-native PaaS solutions with low code capabilities is on the rise. We see a definitive trend around banks focusing on governance and shifting investment into this area that helps them stay compliant and gain a competitive advantage.

David Landi – Head of Asset Management


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