In November, the Financial Conduct Authority issued a call for input on facilitating the development and adoption of RegTech, or the use of technology to solve critical problems in compliance. JWG argued that new and proven tools can be employed but, to do so, the industry must first collaborate in a ‘RegTech commons’ to set the foundational standards. In this spirit, participants at our RegTech roundtable on 11 March agreed that the most pressing issue that technology could help with was the regulation itself.
The FCA are set to publish a paper this summer on the industry feedback on their call for input on RegTech, the RegTech roundtables and the future steps for the initiative. Indeed, a popular theme that the regulators will be considering is the use of technology as part of the rulemaking process, according to Christopher Woolard, director of strategy and competition.
“There are a lot of good ideas that came out of the roundtables. We’re going to publish more of what we think of those ideas in the summer. There’s some interesting ideas in there about how to make regulation easier to interact with for example.” Woolard said in an interview with Regulatory Intelligence.
“As to the suggestion of a ‘robo-rulebook’, we’ll certainly be thinking about it although it can mean different things to different people. When some talk about having a robo-rulebook it is more about saying are we sure your rules, many of which were invented in an analogue world some years ago, still work in a digital world? I think that’s a legitimate question to ask.” he said.
The question of how to design rules fit for the 21st century has two parts: 1. Are the rules accommodative with new forms of technology? 2. Are the rules themselves fit for interpretation in an increasingly technological world? The robo-rulebook predominantly answers part 2 with its premise of making rules machine-readable and interactive, so anyone can query through a protocol what rules they are subject to and how, exactly, they should comply with them. A robo-rulebook would overhaul the complexity of today’s regulatory landscape and it is refreshing to hear a regulator talk positively about it.
“The one big thing that’s on everyone’s mind is how to alleviate the reporting pain. The answer lies in linking the data standards back to an electronic rulebook. A smart rulebook would integrate the many regulatory obligations into a single source which could be accessed by regulators and the industry at large,” said PJ Di Giammarino, CEO of JWG.
“Smart means far more than a collection of static PDFs. To enable access to the right rules, metadata – the data about the rules – is required so that basic questions can be answered in a commonly understood way. For example, the market could get answers to questions like ‘what goes in that currency field for a euro/dollar swap and how is it formatted?’ in a better, faster, cheaper manner with a robo-rulebook.” he said.
Moves towards an increasingly automated rulebook have been made amidst broader regulatory favour on the use of technology in compliance, or RegTech. The FCA has already shown leadership in their innovation agenda, and these latest signals reveal how the results of the RegTech initiative have been discussed and explored in depth.
“How do we think about technology and regulation? We have to be open to ways in which technology could help us do our job better or help firms comply with our rules. Rather than being specific about a particular type of technology that must be engaged, we need to consider whether five years down the line it will be superseded. It’s about all those considerations and how to balance regulations and legislation that often need to be prescriptive versus the fact that there might be different ways of addressing those same problems with technology that may appear in a few years.” Woolard said.
We can obviously expect a more dynamic and digital form of regulation in the very near future. Given our advocacy towards setting foundations – in the form of a robo-rulebook – as an essential prerequisite to the development of RegTech, we will have plenty of food for thought at our upcoming RegTech conference on 5 July.