Singapore, Australia and ‘Fundamental Regulatory Overhaul’

August 31, 2017
By: Samuel Riding

Requirements on balance sheet reporting a stiff challenge for banks despite regulators’ nods to technology’s potential, says AxiomSL.

Market supervisors in Australia and Singapore are leading the push to introduce regtech (regulatory technology) to deal with financial institutions increasingly burdensome data reporting requirements – and the additional data flows these mean for regulators themselves – according to Abraham Teo, global head of tax products and head of product management at AxiomSL.

In an interview with Regulation Asia, Teo reserved particular praise for APRA (the Australian Prudential Regulation Authority) and its efforts to improve reporting taxonomy. “They have their own reporting taxonomy which we are embracing, to tell banks how to report, and give them context. They are trying to push ahead and see the challenges bank face, and are also looking to embrace technology,” he says.

However, Teo argues, Australia and Singapore are in the midst of a fundamental regulatory overhaul of a type which typically occurs only once every 10 years, including updates to submission forms which will require financial institutions to provide much more detail. This is going to be a challenge for institutions both large and small.

He estimates Singapore’s move to MAS 610 on balance sheet reporting is increasing the number of data points financial institutions need to report from 4,000 to 300,000 or more. “APRA is doing a similar thing with EFS (Economic and Financial Statistics).” Last week the Australian regulator issued a timeline for its introduction, with the first phase from 31 March 2019 and the last in June 2020. This gives banks 18-24 months to implement the requirements, slightly longer than had been expected. MAS, meanwhile, is likely to give institutions about two years to comply.

Part of the problem is financial institutions may not be able to find much of the information they will need for these new reporting regimes. Another element is their existing manual processes are unlikely to withstand the data overload.

“A lot of banks are now looking at a monster of a report and realising they can’t throw bodies at it any more. They will have to report every month, and MAS and APRA have also asked for a parallel run period, so the old and the new have to match. This is a challenge for banks in general,” says Teo.

For the largest institutions, the cost of meeting the requirements of this regulatory overhaul can probably be seen as a ‘business as usual’ issue. But it’s a different kettle of fish for smaller institutions, he believes.

“The smaller banks know themselves much better [than their larger peers], but there’s an issue of scale and whether they have the right resourcing to adopt technologies to allow them to comply better. How are they going to find the budget or funding?” he says.

Another factor for the smaller players is that the process of banding together to use a third party reporting solution, for example an external cloud-based regtech (regulatory technology) – which for many might seem the obvious choice to deal with heavier data requirements, might not be as simple as it sounds. As Teo explains: “If you want to start putting it in a common place there needs to be clarity on whether you are allowed to take it out, or put it into the cloud. We are seeing a lot of discussion on this issue.”

This article was originally published by Regulation Asia.