RegTech Intelligence

Plumbing the reporting infrastructure

At JWG’s RegTech conference, now less than a month away, our second panel* will bring experts together to discuss the matter of aligning reporting obligations using RegTech to ease the regulatory burden.

Panellists confirmed so far include Adedayo Banwo (Legal Counsel at Deutsche Bank, London Branch, former Counsel in the Office of General Counsel at the Commodity Futures Trading Commission), Chad Giussani (Head of Transaction Reporting Compliance at Standard Chartered Bank) and Jim Bennett (Managing Director, Sapient Global markets).  Below we outline some of the key points to be looking out for ahead of the discussion.

The reporting headache

During JWG’s RegTech roundtable in March, reporting was identified by consensus as one of the major – if not the biggest – regulatory burdens of post-crisis reform.  A multitude of reporting regimes across the world now apply to a range of financial products and services, and will hit the front, middle, and back-offices of every regulated financial institution. At this scale, mapping one’s distinct business terminology and activities onto all the individual regulatory reporting requirements appears close to impossible.

Fundamentally, the issue arises from the fact that there are so many different ways of knowing the same thing.  When jurisdictions and economic blocs scramble following a financial crisis, to implement a range of reporting regimes across industries, market activities and borders that inevitably will not line up with each other, the result is a burden of complexity that affects both the banks and the regulators.

Even across different regulations within the same jurisdiction, the problem is just as big.  In the EU, investment firms are legally obliged to make their trading activity visible to European Supervisory Authorities (ESAs), government regulators, National Competent Authorities (NCAs) and National Central Banks (NCBs) in different ‘data languages’, using different codes with different meanings prescribed to reports sent on a T+1 basis to different bodies and aggregated in parallel with risk used for statistics.  Furthermore, some regulatory rules, like CRD IV, AnaCredit and Solvency II, require information in formats which will need to be looked at in conjunction with trade and transaction information.

JWG’s analysis on the 687 transaction reporting fields across MiFID II, EMIR, REMIT and SFTR suggests that approximately 40% of these fields cover the same facts. Of this 40%, field definitions are similar for around 63% and formats broadly align for 58%.  From this, it is clear that there is a lack of alignment across both jurisdictions and across regulations.

For asset management, reporting has been one of the biggest challenges due to uncoordinated requirements.  Firms often end up reporting the same information multiple times, in multiple formats, to multiple regulators – such as with different transaction cost disclosures under UCITS, MiFID II and PRIIPs.  UK regulators were quite vocal about these duplicate and inconsistent reporting requirements in their response to the EU’s call for information on the regulatory framework, as this lack of coordination has created an unnecessarily onerous burden for regulated firms.

Enhanced risk data reporting requirements, under BCBS239, FRTB and CRD IV/CRR, will – likewise – lead to increased levels of data being recalled, reconciled and validated.  As more data points result in larger data volumes to be collected and recollected, stored and calculated for risk governance, there will be an ever-pressing need for better coordination and technological development.

Difficult, but doable

Despite these challenges, the roundtable also witnessed a consensus that reporting was one of the most collaboratively achievable regulatory requirements to form a workable solution for.  Participants agreed that a common reference model was required to form a crowdsourced interpretation of the rules, which maps different regulations across multiple jurisdictions to their respective functional areas of impact.

Indeed, the cost and complexity of producing and interpreting this amount of regulatory information would be greatly reduced by a public/private sector initiative which could be used to help inform the views of standards efforts (e.g., use of ISO 20022 and the OTC ISIN study group) and reduce the risk of misalignment in both global and regional efforts.

In terms of the technology, we need a new structural data asset with the potential to reduce the cost and time required to comply with risk and trade and transaction reporting obligations by aligning ‘upstream’ trading and data feeds.

Where next?

During Abide Financial’s recent event on meeting the challenges of new reporting rules, attendees concluded that regulatory reporting requirements were here to stay and are likely to become more complex as new rules in new jurisdictions come into effect. Lack of standardisation across instruments/assets in different reporting fields was also raised as a significant impediment.

Similar to the RegTech roundtable, the consensual approach was to build a framework for all regimes, rather than tackling each rule individually.  This would involve a move away from ‘point-to-point’ reporting towards a centralised, standardised infrastructure with consolidated data and increased outsourcing of reporting workflows to specialist managed service providers.

At JWG’s RegTech conference on 5 July, our panel of experts will discuss how to scale up such a solution using new technologies and harnessing the power of collaboration.  With over 150 C-level delegates now registered, from 40+ Tier 1, 2 and 3 investment firms, including Deutsche Bank, Credit Suisse, Goldman Sachs and Citi, this will be a great opportunity to make progress at this pressing time.  You can find more details about the panel below.

*July conference panel

10:15 Panel: Plumbing the reporting infrastructure – using RegTech to master regulatory reporting obligations, including DFA, EMIR, SFTR, MiFID II

  • The impact of the complexity of trade, transaction and risk reporting
  • Getting beyond reactive programmes to a common response
  • What is required to master the complexity and minimise costs?

Click here to find out more about our industry-acclaimed MiFID implementation training, which we are running on 6 July following the conference.

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