RegTech Intelligence

RegTech data standards – the industry needs to take the lead!

Data standards was one of several key themes at the JWG RegTech Capital Markets Conference on 5 July 2016.

Conversations about regulatory data standards centre on the need for alignment of data obligations and standards, data protection issues, infrastructure legacy issues and the acquisition and ownership of clean, valid and robust data that can be easily recalled and remain flexible for future regulatory change.

The discussion at the JWG conference was no different in subject matter, but did stand out for its candidness.  The need for good data governance, for the industry to take the bull by the horns and lead standardisation and a request for industry professionals to be more honest about their firm’s position and adequacy of data architecture were keenly debated.  Above all, if there is to be movement in the industry, there also needs to be a race to the top – as opposed to a state of stupor resulting from a lack of knowing what to do next.

Data governance

Good data management and governance are the key to achieving solid data architecture.  There must be checks in place to ensure that data processes and policy mandates are being followed firm-wide.  A recurring issue appears to be that different parts of a firm play lip service when asked if they are following policies outlining the processes for handling internal data.  This can no longer be tolerated, least of all because of the senior manager’s regime placing people on the hook, and centrally for the reason that, if policy is followed, it will enable a firm to be agile and responsive to further regulatory change.

Additionally, good governance can ensure good data.  One issue that was highlighted was that maintenance and updating of past data has been poor.  This has resulted in high levels of remediation, leading to greater pressure on data mangers, onboarding services and the reporting arms of firms.  The creation of good data maintenance governance can ultimately lead to less remediation, lower levels of expenditure on data and higher levels of business efficiency.

A data race to the top

Such frank conversation between the industry participants shows that many are in a situation of pain when it comes to data management, resulting from the multiple issues of poor governance, legacy issues or lack of industry understanding on what is required.  Firms are now making the best of a bad situation.

Instead of this, it has been suggested that attitude needs a turnaround, and firms should focus on working collaboratively to the point of creating a race to the top.  They need to work together to understand how to create best practice on data processes and gain clarity on data requirements.  By chipping away at each of the issues, firms can implement a regulation with the aim of being the best in the market.

Industry standards need to be set by firms

There has been much talk across the financial services industry that standards need to be set to interpret regulatory obligations and data requirements.  However, little gets done to set these standards after the discussion.

Someone mentioned that firms seem to forget that they are in the industry and that, if standards are not being set, they have no-one to blame but themselves.

It is obvious that standards are needed, and indeed are desired, so now you need to either start getting involved in industry standards bodies such as FIBO, or quit complaining.

Part of the need for industry collaboration is the creation of a golden source for client data.  It was emphasised that firms holding client data are simply custodians of that data, and do not own it.  Perhaps, instead of firms holding the data, it should be held centrally and made accessible, in the confidence that it is valid and verified.  For this to happen, though, firms will need to cooperate with each other and collaborate to start the engine for a central source.

The backing for this proposal was further underlined by the point that, currently, firms hold the data, but not in a coherent manner.  Instead of cleaning, organising and validating the data themselves, firms use vendors … at great expense – an extra cost for the data that firms already hold themselves.  It is argued that, instead of paying money to vendors, it would be much simpler and cost efficient in the long term to organise and validate the data and centralise it, with standards in place for its maintenance and ownership.

Honesty is the barrier

Whenever a data standards discussion takes place, one thing that is always mentioned – without fail – is the need for industry collaboration.  Unfortunately, little of this happens.  Many reasons are cited, such as time, competition reasons, proprietary data and cost.

However, as agreed upon unanimously by participating firms at the data standards roundtable at the JWG conference, honesty is the greatest barrier to effective collaboration.

Rarely, when firms do get together, are they honest about their situations, and the momentum needed to collaborate is lost because no discussions about the problems and possible solutions occur.

It is obvious that, be it with data governance, creation of industry standardisation or collaboration leading the race to the top, honesty needs to be the first rule of participation.  Until this happens, all conversations about collaboration, standardisation and shared processes cannot – and will not – be productive.

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