The need for a modern data and technology infrastructure

As I said in my previous blog post for UK Finance, the "Dear CEO" letter from the Prudential Regulation Authority (PRA) to regulated financial entities in the UK was a wake-up call - but SaaS regulatory technology offers solutions.

As I said in my previous blog post for UK Finance, the "Dear CEO" letter from the Prudential Regulation Authority (PRA) to regulated financial entities in the UK was a wake-up call - but SaaS regulatory technology offers solutions.

The PRA did offer some praise for those firms that have invested in data and an efficient regulatory reporting technology infrastructure. Moreover, the letter implies that the benefits go beyond regulatory reporting itself, as firms that have invested are enabled to ?make more effective and efficient use of the data in the longer term?.

We have been preaching this message for many years, so it is gratifying to find some vindication of our approach in the PRA's words.

However, we are where we are. To move forward, we recommend the following actions to address the immediate challenges and secure further benefits from a more robust approach to the issues raised.

To address regulatory challenges, institutions must focus on what matters and avoid getting distracted or bogged down in technology or process challenges. A SaaS model makes this possible and relatively easy: you no longer have to worry about the IT infrastructure, regulatory updates are deployed seamlessly, and you will be able to generate regulatory reports, including follow-up requests from the PRA.

Secondly, institutions must empower the business users of regulatory reports, who should be regarded as beneficiaries just as much as the regulators: for example, the risk managers who want to monitor their regulatory capital ratios, leverage ratios etc. This will help win cross-functional buy-in.

Rather than regarding regulatory reporting as a chore, consider the wider benefits for the firm. Regulatory reports provide the basis for management reporting, with indicators drawn from the regulatory reports presented in dashboards that are generated in real time and not just at the end of reporting cycles. This will help win top-level sponsorship. (Again, the SaaS approach makes this possible.)

Invest in control and reconciliation features. This will give you full transparency and data lineage, smart adjustment (so that changes to data propagate through other reports based on cell dependencies). You will also be able to perform variance analysis so that you can identify the root causes of data quality issues. These are all things that the PRA highlighted.

Finally, invest in an end-to-end solution. This can no longer be dismissed as a marketing buzzword: the PRA's letter explicitly refers to the regulatory returns process as end to end. You can only meet the PRA's requirements if your technology is up to the task and reports (for example on complex Basel analytics) are configured by people who understand both the underlying data and the requirements of the regulators.

For more Regulatory Technology thought leadership from Moody's Analytics visit www.moodysanalytics.com/bankingcloudRS
 

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The need for a modern data and technology infrastructure

11.04.22

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