March 11, 2015 – By Thierry Haensenberger, Luxembourg Entity Manager and SVP Business Development
Change is in the air in Switzerland, where the Swiss National Bank (SNB) is introducing new versions of all of its regulatory reports. These reforms will seriously challenge the agility of financial firms, which must be able to adapt quickly to the changes.
Financial firms in Switzerland have become used to using a single, generic XML schema for all of the reports they submit to the SNB. However, this is now being replaced by new, subject-specific XML schemas. As well as statistical reports, the changes will apply to all Basel lll reports filed to the SNB. The final versions of the new schemas will not be confirmed until May. However, firms will need to start using them in November and December.
Of course, the challenges for Swiss financial firms are not confined to the new XML schemas – there are many other domestic and global regulatory changes to come. These include new liquidity reports (the Net Stable Funding Ratio), new derivative transaction reporting requirements (Finanzmarktinfrastrukturgesetz, better known as FinfraG), and new cross-border tax disclosures (the Common Reporting Standard). Additional requirements of the Foreign Account Tax Compliance Act (FATCA) are also being rolled out.
The new reporting requirements present a number of challenges for financial firms in Switzerland. Arguably, the most significant of these is change management. If Swiss firms are to implement so many reforms in a short period of time, it is essential that:
- they rationalize the number of reporting systems they use, ideally keeping only one
- they use a reporting system that can be updated quickly and smoothly
- they use a reporting system that offers the right level of transparency to make testing efficient
From the moment a regulator announces a change to its reporting requirements, financial firms are in a race against time to prepare. Over the years, many firms have found that using a black box platform makes them entirely dependent on their vendor’s ability to quickly release updates. If there are any delays at the vendor’s end, this means the firm will start the race to comply at a serious disadvantage.
A common issue faced by firms is that they cannot upgrade their reporting platform to accommodate a regulatory change without undergoing a complete software update – meaning full regression testing – even if the intended change is small. This is an unnecessarily long and complicated iterative process, which eats into the time that firms have to prepare for a regulatory change.
If an issue is detected during testing, the firm may need its IT team to rebuild the extraction program so the data is loaded in the right format, or it may need the vendor to fix a bug in its released version, meaning another delay, another delivery, and more regression testing. The time this takes increases the likelihood of a firm missing a regulatory deadline.
Another obstacle is created for financial firms if their reporting platform prescribes the use of a specific data model. This means the firm cannot begin the process of sourcing the additional data it will need for a new or updated regulatory report until the platform vendor provides the new data model it will support. Again, this inefficient approach makes the window of time financial firms have to prepare for a regulatory change narrower.
Financial firms in Switzerland can put themselves in the best possible position for managing the regulatory changes ahead by partnering with a platform vendor that separates out software releases and regulatory update releases. This will enable firms to upgrade quickly when regulations change, avoiding the costly regression activities associated with the full software upgrades that are often required even for minor changes.
Working with a vendor that separates out software releases and regulatory releases allows financial firms to preserve a stable technical framework and to handle different versions of a regulatory requirement concurrently. In this way, firms can focus on testing regulatory changes using a unique set of test data rather than debugging technical packages. In addition, they will benefit from a greatly reduced total cost of ownership.
Significant efficiency can also be gained by using a platform that does not prescribe a specific data model and that is flexible in the way it imports data. This means that as soon as a regulator announces a change to its reporting requirements, the financial firm can start sourcing the necessary data sets – it does not need to wait until the vendor has updated its reporting templates and data model. This saves valuable time and enables firms to more comfortably hit their regulatory deadlines.
Swiss financial firms face a busy few months and years ahead. By streamlining the way they approach change management, they can ensure they have the agility they need to keep pace with regulatory change, while maintaining a profitable business model.
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Swiss National Bank Statistical Reporting
AxiomSL offers all of the functionality and templates banks need to report to the Swiss National Bank (SNB), including support for its new subject-specific XML schemas… To read more, click here.