How financial institutions can manage their compliance cost challenges

A recent webinar hosted by RegTech firm Regnology looked at how financial institutions may be hindered by high compliance costs and how these challenges are being met.

The webinar included Regnology senior vice president of product management Bodo Windmöller – who headed the panel -, United Bank of America head of regulatory reporting Veena Srikumar, Close Brothers head of regulatory reporting David McDonald and SMBC Europe head of regulatory reporting Nick Grist.

Kicking off the webinar, Windmöller asked the panel; what are the major challenges to improving the state of regulatory reporting? To this, Srikumar responded, “I think the major challenge is the root of everything, which is infrastructure. If you don’t have the right IT infrastructure and the right technology in place to support your reporting, it is very difficult to improve it. This is not today’s challenge – this has been a challenge for quite a long time. You have GDPR and MiFID, for example, and these need to talk to each other. So, I don’t see this challenge going away.

On the same question, McDonald quipped that whether its risk data or regulatory reporting, 95% of the problem is getting the data and getting it right. For Grist, the watchword was data. He said, “For me, it’s about data, data and data. The drive from the regulators for more data, or more information, doesn’t necessarily make the data better. With the constant backdrop of new regulations – we’re currently looking at all of the sustainability regulations which are going to be extremely data-heavy – so, how do you source that data? How do you get assurance around that data? How do you pipe it through your network of legacy systems? That’s the challenge that we are all facing.”

McDonald continued, “One thing I have observed over the years is that regulatory reporting is a place where a few disciplines come together. The reporting that we produce tends to be designed from an accounting mindset – accountants think ‘give me a big number and then break it down by a dimension’ and that will enable them to fill in their reports, something seen at the Bank of England.

“Then you have the people who write the rules, and they tend to be lawyers – everything that they write is written in a legal context with lots of cross-references. So, it helps to have someone who is really sharp and has a good memory to do all that for you. Then you have the databases, which are designed by people who think about data in a multi-dimensional perspective. So – what is all the data I need and how do I structure it? With these three disciplines coming together, it makes the whole space very complex.

Some of the key take-aways from the webinar included the need for the industry to secure better levels of reporting efficiency. To date, some regulatory reporting processes can be sluggish and burdensome – making the process all the more tougher for companies.

It is also key, the panel found, to drive down costs with the mutualisation of resources. In addition, it is imperative for the industry to find the right balance between costs and benefits.

The panel also set out how sharing of IT infrastructure and operational costs across many financial institutions through managed services and cloud products can achieve cost reductions between 30% to 70%.

Download the full webinar here.

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