Regulatory reporting - solutions to upcoming challenges: 7 Questions

Despite the events of the past year, the regulatory reporting change agenda shows no signs of slowing down. Financial institutions around the world continue to implement challenging, complex new regulation which impacts systems, data and activities right across their organisations and requires regulatory reporting solutions built for the modern environment.

Philip Flood, Business Development Director, Regulatory and STP Services, Gresham Technologies recently joined Gert Raeves on his 7 Questions podcast to explore how approaches to regulatory reporting are changing across the industry.

What’s new for 2021

New regulatory reporting requirements and deadlines have become part and parcel of everyday life for financial institutions, but this doesn’t mean that implementation has become trivial. With upcoming deadlines including MAS reporting for FX, credit and commodity derivatives in October 2021 and Consolidated Audit Trail (CAT) phases 2C and D in April and December respectively, firms are facing a busy year. However, they have also learned that implementing regulation doesn’t mean it’s done and dusted – there are always remediations and updates to contend with. Both SFTR and FINRA TRACE face potential updates this year, and the CFTC rewrite of Dodd-Frank for 2022 is already a hot topic. The potential of regulatory divergence between the EU and UK post-Brexit remains high on the list of concerns as well, and is something that regulatory reporting vendors and financial institutions alike will be keeping a close eye on.

A shift in strategy

The challenge though lies not only in individual rules but also in their cumulative effect. Firms under operational and financial pressure continue to rush out short-term, tactical fixes instead of taking a more strategic approach. This increases fragmentation of systems and data, making reporting more complicated – and expensive. The implications of this fragmentation extend to connectivity, with the need to build – and maintain – different adaptors and transformations for multiple venues and partners, which is why many are now considering outsourcing this to specialist vendors.

The financial and operational consequences of this approach are becoming too large to ignore. STP in particular has often been the victim of ‘if it’s not broke, don’t fix it’ but the fact is that poor implementations with fragmented data are creating significant inefficiencies. A unified approach is crucial because of the data hungry nature of regulatory solutions. Being able to ingest data in real time and map and enrich reference data from third party sources is vital.

The requirement to report across multiple jurisdictions and regimes also means that organisations can benefit from shared data lakes and business rules – the latter can be shared between your reporting engine and reconciliation and optimisation process, allowing you to understand and validate the data that you have sent.

A picture of success

So what does success in regulatory reporting look like? A combined data set with all reporting activity in one holistic view is the ultimate goal. With regulation one of the areas where data complexity is often at its highest, with tangled structures, high volumes, and multiple reporting relationships, the ability to manage this complexity is also key. At the heart of this is a truly data-centric approach, with strong data lineage to the source systems that drive reporting. Regulatory reporting solutions cannot fix upstream issues – these are entirely down to the level of control that you have over your data.

Ultimately, addressing one-off projects with tactical solutions is a practice which needs to fall by the wayside – only by embracing a more strategic approach which fully leverages the capabilities of technology and solutions designed for the new regulatory reporting world, can the industry hope to achieve efficient, accurate, and cost-effective regulatory reporting.

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