Data infrastructure strategies turn regulatory reporting into business intelligence for financial institutions.
Faced with growing regulatory reporting demands, banks and capital markets institutions that build data management strategies – aided by standardised data infrastructure – can gain better business insights and decision making to improve bank risk management, competitiveness and efficiency.
Regulatory reporting today requires banks, capital markets and other financial institutions to collect and submit vast quantities of data points a month to regulators, plus evidence of its source traceability, with serious consequences for any errors or misleading conclusions.
The data aggregation task can be onerous, especially for organisations with complex structures and disparate systems, where data is stored in a range of formats and must be pulled together manually.
With a host of different types of reports covering data associated with risk, finance, customer transactions, capital, treasury, profit and loss accounts, and human resources, there is a significant overlap between different sets of regulatory requirements, and potential duplication involved in preparing submissions.
Over the past few years, financial institutions have devoted much time, energy and money to develop processes for data aggregation and producing regulatory reports. Although some have consolidated and rationalised their technology infrastructures, or built piecemeal systems in response to each new directive, the dynamic nature of the regulatory world means that amendments to existing requirements, or new initiatives, continue to add demands upon existing systems.
Given the high degree of commonality between different regulations, now could be an ideal moment to establish standardised ways of managing data for every type of requirement. By investing in middle and back-office systems, and building an enterprise-wide data infrastructure, organisations can “do it once and do it right” with a single data warehouse rather than creating separate processes to satisfy each regulatory body. An integrated view of data across products should lead to more consistent, accurate reporting, with clear sources that can be traced instantly.
Beyond compliance reporting, there is an opportunity to harness the power of data to improve the quality of decisions and enhance the business. Regulation can be a catalyst for improved data management, analysis and reporting, offering some remarkable insights. Organisations with a strong data culture and a systematic approach to reporting and analysis will gain a closer understanding of customer behaviour, identify market trends earlier, and compare the performance of business units, teams and individuals.
Advanced data insights offer more complete and up-to-the-minute knowledge, which enables capital markets firms to optimise portfolio composition, and carry out trades faster. And, all financial services companies should benefit from faster analysis and more efficient modelling, which improve targeting and pricing, credit and liquidity models, and capital planning.
For global banks, especially those with regional operations in Europe, Asia and the Middle East, risk data aggregation has become a laborious task of aggregating risk data and positional / transactional data across various jurisdictions to comply with global and local regulations. By enabling a risk infrastructure with a quasi real-time, scenario-based risk analytical engine, it would feed into the front-line and business decisioning framework where traders factor in funding costs, capital and liquidity implications while factoring in counterparty and credit risk decisions.
Chief Data Officers (CDOs), as data custodians, can lay the foundations for sophisticated data management strategies and coordinate information across the organisation. With overall responsibility for data governance and quality, they can help raise analytic capabilities within finance, risk and business units, and link different functions, utilising the skills of centralised data aggregation specialists.
Rather than viewing regulation as a tiresome and costly inconvenience, banks, capital markets and other institutions should establish a culture of compliance, and build a wider data culture. By embracing data under the stewardship of a Chief Data Officer or equivalent, they can benefit from accurate, timely and insightful analysis that meets regulators’ demands and also informs key business decisions, for a real competitive edge.
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