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Miles or kilometres, celsius or Fahrenheit, inches or centimetres - we come across different ways of communicating the same data every day. When people use different methods of measuring the same thing, it can create confusion.
When it happens in a sector like financial services where tens of thousands of transactions are processed each minute of each day, it can cost both regulators and the regulated significant amounts of time and money. Inconsistencies result in slow, inefficient processes. Different approaches to data used by different geographies or sectors in dealing with regulators cause delays, errors, and duplication of work.
A digital “lingua franca” - a common language to process data in the world of financial regulation - is sorely needed. Granular Data in SupTech can be part of the solution.
The volume of data financial services organisations and regulators must process is increasing exponentially. This surge in data within the datasphere since 2010 and projected to 2025 is illustrated below, broken down by region.
Financial regulators are facing the same challenge, and a failure to adapt harms all stakeholders – the regulator, the regulated, and the public.
The pollsters consider this number conservative. The poll found that even where common standards exist, interpretations differ across borders. This burden disproportionately impacts smaller institutions.
The Bank of England acknowledges this pain point in financial regulation: “The Bank often requires data to be aggregated in ways that make reports hard to repurpose. This leads to more requests for new reports or breakdowns of existing reports than would otherwise be the case. It also leads to redundancy in the reporting process, as firms need to re-assemble the same underlying building blocks in different ways for different reports.”
Granular Data in SupTech is one part of the solution for handling the exponential increase in data. It enables this digital lingua franca for financial regulation. Granular Data means data that is broken down into the finest, most detailed level that it is practical to use. Breaking the data down to its smallest components is called disaggregation.
For the financial services organisation, this means:
For the regulator, this means:
Solvency II is a directive in EU law that codifies and harmonises the EU insurance regulation. Under the law, EU insurance companies must hold a certain amount of capital to reduce the risk of insolvency.
The Solvency II collection asks insurers to provide 30 data points on each asset they hold – including their nature, issuer, economic sector, value, and acquisition price. The bank uses the Vizor SupTech platform, called the Bank of England Electronic Data Submission (BEEDS) Portal, to collect this data.
The bank noted several benefits:
Granular Data in SupTech is only one part of the solution. Regulators should not consider them in isolation. Supervisory authorities must adopt a range of strategies. This should include technology, processes, and tools, including:
The need for a common language based on Granular Data in SupTech is clear, but each regulator needs to plan and find their roadmap to get there.
A phased approach to introducing granular data allows for time to attain and promote industry buy-in, as well as meet your most pressing supervisory needs in a prioritised manner.
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