RegTech Intelligence 
Before the climb, you must have a vision of what success will feel like. You may not know the precise route, but a general direction, who you need beside you and a sense of the milestones along the way are key to getting in the right frame of mind.
After 8 years of compliance efforts, we know we need common solutions to shared regulatory issues. This is a first vision of success – to do what we do today, but in a better, safer and cheaper manner.
JWG are leading the RegTech Council’s climbing party as we explore the right structures required to support what will be a multi-decade expedition. Whatever we do, however, we cannot move fast enough for those that are wrestling with the big themes of the regulatory reform programme. Solutions are needed now.
Therefore, we have a two-stage climb ahead. First and foremost, the Council will need to stay focused on the initial vision of getting value out of collaborative efforts to interpret, assess and create solutions for new obligations coming due today. Whether that be how we can create a taxonomy to have a common reference for which functions and businesses are affected by a regulation, a common data model, a method of modelling the obligations or other artefacts, there is real value in having a ‘free climb’ together and getting proof that there are better ways to get up the mountain than imagining there is a helicopter to fly us to the top.
Once this first stage delivers practical tooling to propose, we can take a view as to where and how it can be made robust and scalable. Could our taxonomy or data model be adopted by a standards body? Might an existing trade association help get endorsement? Would any regulatory sandboxes or labs wish to adopt it so that solutions in the space could be recognised as conforming with a view of what good looks like? The answers to these questions allow us to define a view of the second stage to the journey.
When we have an artefact, its owner and a method to solve the immediate challenge of compliance we can move on to vision 2. This is the second stage of the climb during which we can rethink the problem ‘end to end’. For example, if we have a new taxonomy or data model to save billions in compliance projects, why couldn’t it be adopted by the politicians as they create new rules? Why couldn’t we retag the existing rule book with it? Would it not be possible to make it the basis for assessing the effectiveness of sandbox or incubators that are investing in new solutions?
In other words, the RegTech ascent will be about learning by doing … and then scaling what we know works. In order to make this happen we need to break the problems down into manageable pieces.
As we have covered before, much difficult dialogue has to occur to reach a common language, especially as even departments in the same firm can refer to subjects in diverse ways. Unstandardised siloed data leads to huge inefficiencies and resource drains, but the initial effort required to change it makes for a difficult dialogue just to initiate, let alone implement.
As shown in Figure 1, RegTech conversations are comprehensive – they require an understanding – not only of the legislative texts, but the ways to deliver solutions and a knowledge of how new technologies play into the equation. Many tribes of RegTech need to be involved in order to get consensus on any one of the solution areas. Compliance, legal, technology, operations and regulatory change must all have their seat at the table – and this table is linked to others in which different representatives of the same tribe might sit.
Figure 1
Although the changes pose challenges, they are not insurmountable, as efficiencies gained in this space translate in many ways across firms and result in long-term cost reduction, as well as security, as trade-off for the initially high demand on resources.
To acknowledge and manage the challenges, the discussion is focused on starting in logical areas, rather than attempting a large overhaul of existing systems and behaviours and risking complete immobility. Initially beginning with a shared issue, such as reporting, for example, with easily identifiable, practical rewards for collaboration and standardisation, will aid in communicating the advantages of the approach, paving the way for further projects.
A clear example of the practical advantages of a RegTech Council is in reporting, and this common issue could be just the right issue to begin with, due to its shared nature that could become significantly more efficient through standardisation and collaborative dialogue, models and artefacts. Currently, reporting is challenging and inefficient, costly and complex, due to the lack of uniformity around the language we use to talk about data and requirements themselves, resulting in costly solutions, interpretations and mistakes. Common language and solutions in the form of shared artefacts and vetted solutions from ‘compliant’ supply chains can improve on the difficulties the industry currently faces. A common reporting dictionary could save valuable resources and improve the quality of data reported through the alignment of reporting obligations across legislative text; a clear image of reporting obligations through uniform vernacular and verified RegTech solutions.
With the various hurdles ahead, it is key that we have the right dialogue, in the right way, which is inherently challenging in that our goal of standardising and aligning disparate views acknowledges one of the vital issues: disparate views. It is vital then, at this early stage, to address the governance of such a body, the role and inclusion of members, and a roadmap for the route ahead. If done correctly we lay an excellent foundation for the journey ahead. If done wrongly, we end up lost and far from reaching the prize at the summit.
Effective stakeholder engagement through balanced market participation needs careful planning to ensure that the necessary information from the right people is communicated and to begin to bridge the gaps between the disparate views of the market participants – regulators, firms, their market infrastructure and supply chains. With the highly fragmented nature of the financial services industry, this could mean scores of associations could be involved in a single effort.
This process will ensure that vendors have a channel through which to engage, that regulators and firms can engage in dialogue with them and that data and technology insight can be accessed at the appropriate places in the discussion.
Firms, regulators, standards bodies and other stakeholders need to come together now, agree a roadmap and structure for the ascent up the RegTech mountain and begin taking those initial steps.
To learn more about what JWG have proposed to regulators that is required for reporting, see our forthcoming article ‘We need better reporting tools for the RegTech ascent’.
The first step, however, is ensuring that the correct people have a seat at that table and that the discussion has meaningful practical application. The path will be challenging, as with any change in outdated and inefficient systems, but proper governance planning at basecamp will ensure a smoother ascent.
JWG is organising more council meetings now in preparation for the second plenary session on 23 June. The agenda will cover:
- The common impact assessment for new regulation
- Tools required for ‘good’ regulatory reporting
- Infrastructure risk management and capital relief
- Organisation requirements for the initial stages of the climb
- Priorities and plans for the third plenary meeting.
Please get in touch if you would like to be involved by emailing regtechcouncil@jwg-it.eu