After years of time-consuming, manual processes moving data from Excel files into reporting templates, we are at a tipping point when it comes to regulatory reporting. A new report titled ‘Digital Regulatory Reporting: Tipping Point 2021’, prepared in partnership with JWG, an independent regulatory think-tank, suggests that standardising the way we describe data is a priority for both public and private enterprises.
The survey asked 20 public and private central banks and prudential regulators for their top priorities in 2021. The respondents identified moving from analogue to digital methods of collecting information; defining the languages, reference data and dictionaries; and delivering data to recognised standards in a governed manner as the top priorities.
PJ Di Giammarino, CEO JWG Group and author of the report said: “This focus on global alignment of data needs comes as the industry has reached a tipping point fuelled by COVID, on top of a decade in which the industry built a patchwork of data feeds to meet new regulatory demands for transparency. Over the last decade, the number, scope and complexity of prudential requirements have been substantially expanded.”
One of the biggest challenges is seen as achieving alignment between public and private sector organisations on what good data looks like. For future modelling, agreement needs to be found between what humans consider ‘good data’ and what constitutes good data from a machine-readable perspective. The trend toward granular data looks set to continue. When data is broken down into its smallest components, it’s easier to analyse than aggregate data.
Scaling up the approach to standards is critical as the industry reaches a Covid-driven tipping point to get more accurate data quickly. The report notes that one of the preconditions to achieving digital regulatory reporting is a strong commitment and support from top management at both financial authorities and financial institutions. Consensus-building is important. This includes a culture of innovation that relies on data-driven decision-making and allows for questioning “legacy thinking” within financial authorities.
Several initiatives to standardise data are already underway, particularly in Europe. However, because of the complexity involved, it’s expected that any move to implement ISO standards will primarily involve larger financial institutions that have a greater capacity for change management.
Di Giammarino says: “Will we need to work on removing ambiguity from legal text, data standards, data specification, rules specification, reporting instructions, use cases and other obstacles we have yet to wrestle with? Yes. But, unlike a decade ago, we have the right people at the table with a common objective and can solve these problems.”