Digital innovation for financial regulation: Cloud as SupTech enabler

The financial sector has grown increasingly complex and less transparent with the emergence of cryptocurrencies, novel payment providers and other financial innovations. Shortcomings in data coverage, quality, timeliness, and granularity have affected regulatory reporting data, making it harder to make informed decisions.  

Regulatory reporting requirements have increased in recent years to try and address these issues and will continue to develop further in the future, especially regarding data granularity and reporting frequency. 

Evolving regulatory reporting requirements are leading to an increase in data volumes and associated processing workloads amid growing pressure on software solutions to reach higher levels of availability and shorter update cycles. 

Cloud is more scalable 

The legacy software that many regulators use is typically unable to scale to meet the increasing workloads and data volumes, resulting in unacceptable processing times or failure which cannot be remedied due to outdated system architectures.  

Modern, cloud-native software can provide a range of benefits for financial regulators. It is designed to scale in an elastic fashion as needed so computational resources, such as processing power or storage, can be added nearly instantaneously. Regulators can respond immediately to dynamic spikes in demand, such as seasonal peaks, and hedge against growing workloads in general. 

Cloud resources can be released automatically when demand subsides, avoiding idling and unnecessary cost, making cloud deployments very well-suited to short-term ad-hoc data collections.  

Cloud is faster 

Allied to scalability, the cloud is also faster and more agile. Regulatory changes, innovative features or even critical bug fixes can be deployed and put into production much faster than with on-premises deployment where provisioning, installation and system testing usually require considerable time.  

With metadata cloud, regulatory and software updates and improvements can be provisioned continuously in short release and feedback cycles due to an integrated continuous development stack, micro-service architecture and containerised software deployment.  

In addition, the latest software version can be made available to the regulator seamlessly in short time frames via a cloud deployment, which is facilitated by highly standardised cloud environments.  

Changes to regulatory metadata (e.g., for ad-hoc data collection) can be further enhanced with integrated cloud-based tooling for management and deployment of machine-readable regulatory metadata (e.g., templates, validation rules, or workflows) in a self-service fashion by regulators. 

Metadata Cloud approach: Leverage the benefits of the cloud without completely moving your data there 

Legal and governance issues pose a significant hurdle for competent authorities around the globe to move highly sensitive regulatory reporting data and basic data collection operations to the cloud. Concerns have also been raised over factors such as operational resilience, concentration and risk management.  

One possible solution is to adopt the best of both worlds, our Metadata Cloud approach, which enables central banks and financial supervisory authorities to access the business advantages of the cloud while still keeping their regulatory reporting data on-premises.  

Basic operations and the storage of regulatory reporting data remain on-premise at the competent authority, alleviating data protection and privacy concerns. The Vizor SupTech Platform moves system testing and client-specific storage of public or less sensitive regulatory metadata (such as reporting obligations, templates, validation rules, workflows, etc.) to the cloud in an as-a-service fashion. 

Competent authorities can avoid time-consuming installation, update and testing procedures by “mirroring” the version of interest of the solution or regulatory metadata provided in the cloud to on-premises operations across multiple instances. This allows them to roll out new features or regulation in a speedy and agile fashion while retaining full operational control.  

Shifting regulatory metadata to the cloud also lowers the barrier of entry for the industry to machine-readable regulation, reduces ambiguity and increases data quality.  

Swedish regulator benefits from the Cloud  

Sweden’s financial supervisory body, Finansinspektionen, which supervises nearly 2,000 companies, has already seen significant benefits since implementing our out-of-the-box SupTech platform. These include: 

• Reduction in IT maintenance effort and costs due to the economies of scale. 
• Elasticity of computing power for more efficient use of resources 
• Almost unlimited data storage to support ever-growing data volumes 
• Computational resources are only allocated when required.  
• Immediate response to dynamic spikes in demand, such as seasonal peaks. 

A step in the right direction for SupTech 

Moving regulatory metadata to the cloud can help accelerate the overall SupTech agendas of regulators by allowing rapid provisioning of whole new feature sets, as well as the required prerequisites. It can be achieved with minimal disruption to regulators – and the entities they regulate – compared to the much more daunting prospect of a wholesale shift to cloud.