The cost of compliance to the regulatory standards consumes approximately 20% of “run-the-bank” cost base of a financial services provider and about 40% of “change the bank” costs for ventures presently in progress. Dodd-Frank and BCBS-239 support consumer protection; however, call for investment to manage at scale, placing a burden on the profits of the financial sector. Failing to comply has resulted in more than 200 billion dollars in fines during the past five years and has also caused an increase in the concerns for personal accountability for the banking executives.
Local banks are also not exempted. The American Bankers Association recently conducted a survey of small American banks and established that approximately 50 percent small American banks have dropped their product offerings, lowered staff because of the stress of regulatory compliance, and the consumer support is not up to the mark pertinent to their efforts towards compliance.
Regulatory reporting demands a swift merging of varied data available throughout the financial organization. This can be extremely costly and resource-intensive task. Even when financial organizations are spending approximately 4.5 billion dollars annually on compliance only, they are still paying billions of dollars in fine. Diverse data management for regulatory reporting is a multi-tiered challenge for the modern day financial sector.
The Data Assortment Bottleneck
One of the most complicated challenged associated with the compliance is standardization of the data that is available in multiple formats and lies within different sources. Contemporary banks employ a growing number of data silos, ranging from outdated mainframe structures and conventional data storages to contrasting spreadsheets, data pools and all other things in between. These structures support business lines and mostly incorporate only within the range of regulatory reporting procedures.
The preparation of data is usually accomplished with the use of manual procedures, which are documented below par can hold a possibility of misinterpretation, not only by the administration but also by the team of cross-functioning departments. In most of the cases, such procedures make use of varied products and consumer identifiers, diverse collection chains, and multiple data formats, which eventually results in unreliable results, which are burdensome to combine. Bringing this data to a single platform when required can become an exceedingly tough and expensive task, making it a critical concern when a number of regulatory agencies require periodic reporting.
A further addition to the challenge of data assortment is the requirement to make particular amendments to data as per the requirement of a specific regulatory body. For instance, a bank whose analysts have labeled certain positions as ‘bank desk’ may require to be relabeled as ‘leveraged loans’ in order to address the terminology requirement of a specific agency.
A Rising Challenge
Several latest regulation in the United States have led to the increase in the demand for improved and quicker reposting, a few are almost real-time, demanding to report only after a few days of an event. For instance, BCBS 239 demands banks to streamline, update and completely document their active data structures to assure the precision and relevance of data accumulation along with enhancing practices for risk management throughout the financial industry.
Approximately 40,000 regulatory updates have been in the past five years, and the current unstable political landscape indicates an unending confusion. Consequently, most of the executive associated with the financial industry propose to enhance their investment in regulatory compliance. Market leaders in the financial sector have already started to design and apply strategic data approaches, which are scalable as well as flexible.
Best Market Leader Data Strategies Making Compliance at Scale Possible
Documentation of Data Lineage
Data tracking is at the core of the financial services compliance regulation, being used to report on the performance of a firm and its transactions along with those of their consumers. Every time the data is evolved, which includes amendments, movements, or incorporated on a calculation, an automated track should be maintained. Many firms comply by making use of manual spreadsheets, which is a relatively slow procedure, with a higher possibility of errors, and extremely difficult to scale pertinent to the massive volume