Most global banks are planning to integrate their regulatory workflow data. But keeping up to date with the fast pace of regulatory change, as well as staying compliant with changing regulations and adhering to respective regulatory deadlines, is hindering that move. This is according to a new survey from Wolters Kluwer and The Banker, which asked more than 100 senior level executives in risk, finance and compliance functions in banks across the world for their views on the data challenges they face.
Almost all (95.6%) respondents plan to integrate data across their regulatory workflows in the long term. When asked how integrated their regulatory workflow data currently is, a significant majority of respondents – almost eight in ten – revealed they had partially integrated this aspect of regulatory compliance, with plans in place for further integration. However, only 6% of respondents – the majority based in the Americas – have completely integrated regulatory workflow data. Just one respondent said its organization had not integrated and did not intend to integrate its regulatory workflow data.
Three-quarters of respondents also reported that creating an integrated and consistent view of data across the business was a major technological challenge. Just under half (46.0%) also pointed to integrating and merging technology as a significant challenge.
Legacy systems are a somewhat inconvenient fact for financial institutions – they have invested significant resources in these systems and are reluctant to abandon them. Their integration with new technologies is a concern, but so too are other issues such as inflexible technology support (cited by 56.6% of respondents) and the multiplicity of legacy products (54.9%). Working with legacy systems by applying a central finance, risk and regulatory reporting data warehouse could make an integrated regulatory workflow a reality, as discussed in previous studies by Wolters Kluwer.
The survey also found that the top concern for banks is keeping up to date with the pace of regulatory change (55.8%), followed closely by keeping compliant with changing regulations and adhering to regulatory deadlines (54.0%). The same percentage of respondents cited data validation and reconciliation of regulatory data with risk and/or financial underlying data as a challenge. Worryingly, 41.6% said they found interpreting regulations a challenge, which could suggest that some firms are struggling to source the appropriate expertise.
Nearly 70% of respondents cited the integration of existing and new technologies as their primary technology challenge. The increasing focus on granularity by regulators means existing systems are no longer fit for purpose and financial firms must integrate new systems that can cater to these needs.
“Integration should help firms to develop regulatory compliance and reporting solutions that answer the need for increased data granularity and transparent data lineage. This new survey shows just how important regulatory data integration is for the world’s banks,” comments Rajat Somany, Vice President, Global Product & Platform Management for Wolters Kluwer’s Finance, Risk & Reporting business. “Creating and maintaining such solutions requires a focus on data structure and management that permits each piece of information to be understood in the context of others – as a detail when it’s necessary to consider it on its own, but also as a piece of a much bigger puzzle.”
Regulators’ focus on data has put pressure on financial firms’ practices across a wide range of factors including availability, consistency, quality, reconciliation and data lineage. As with many of the issues surveyed, no single factor stood out – financial firms are grappling with a multitude of challenges. Nearly 62% of respondents cited achieving the required data quality as a challenge. The next biggest challenge is ensuring data consistency (53.1%), followed by data availability and the sourcing of critical attributes (49.6%).
“Data quality is clearly the biggest challenge financial firms face in complying with regulations, as evidenced by almost six out of 10 (58.4%) admitting they were not very confident in the quality of their firm’s data,” Somany adds. “This was mainly due to data management and data governance processes not having been clearly defined, but the lack of relevant technology and resources also play a role for some.”