Technology and regulatory pressure

“French”

By Thierry Haensenberger, Senior Vice President, EMEA, AxiomSL

Banks of all types and sizes have enjoyed significant benefits as a result of their use of technology in recent years. Much attention is often paid to cutting-edge trading platforms. However, without a doubt, it is in the area of regulatory compliance that technology is making the most significant contribution at investment, private and retail banks.

AxiomSL - Thierry HaensenbergerThe years since the global financial crisis have been marked by a huge increase in regulation of the markets. Banks today are required to send regulators more detailed information about their activities at more regular intervals than ever more.

Basel III is typical of the measures that are being introduced to prevent a repeat of the events of 2008-9. This wide-ranging regulation requires banks to use hundreds and even thousands of pieces of data to calculate their exposure to different types of risk and their corresponding capital requirements. The banks must then report on the results of these calculations in detailed filings to the Swiss National Bank (SNB).

When faced with complex, data-intensive requirements such as Basel III, the Foreign Account Tax Compliance Act (FATCA) and others, the manual processes that banks have often relied on for regulatory projects in the past are no longer viable. Instead banks are embracing technology that can automate the entire compliance process – extracting all of the necessary data, running the mandatory calculations, populating the regulatory reports and submitting them to the authorities.

Sophisticated regulatory reporting platforms such as these are enabling banks to meet the aggressive deadlines that have been set by regulators and eliminate human error, while avoiding the costs associated with manual processes. However, in order to maximize these benefits, a number of important points should be borne in mind.

As regulators roll out more requirements, there is often a temptation for banks to install a new reporting platform to manage each new regulation. This is an extremely inefficient approach, as the same data and processes are often needed to comply with multiple regulations. Relying on separate platforms also results in higher maintenance costs and increases the likelihood of discrepancies between the reports produced by different systems. Banks also experience these issues when they choose to use separate reporting platforms in the different jurisdictions in which they operate.

In order to enjoy the full benefits that technology can bring, banks need to focus on rationalizing their compliance architecture and avoiding unnecessary complexity. Rather than spending time and money loading and processing the same data on multiple platforms, banks should seek to minimize the number of different platforms they use – ideally, using just one to comply with all regulations in multiple jurisdictions.

Change management is also an important consideration when embarking on a regulatory compliance project. The regulatory environment is in a state of flux, with new requirements continuing to be developed and rolled out, and banks often being given little time to prepare. This is the case with the new report templates the SNB plans to issue in May, giving banks less than six months before they have to start using them.

Many banks struggle to manage changes such as those being introduced by the SNB because their chosen reporting platform does not allow them to accommodate regulatory changes without instigating a complete software update – which is time-consuming and often requires input from a team of experts. As the regulatory changes keep coming, it is therefore essential that banks prioritize flexibility and use a reporting platform that can be quickly updated when requirements change.

Technology is a vital asset for banks as they negotiate a period of unprecedented regulatory change. In order to fully harness its potential, it must be combined with a focus on consolidation and flexibility.

This article was originally published by L’Agefi.

To discuss this article further, please contact: emea@axiomsl.com