This September, the Bank of England’s Prudential Regulation Authority (PRA), wrote to the CEOs of banks and building societies to warn them of “significant deficiencies in a number of firms” when it comes to the processes they use to deliver accurate and reliable regulatory returns. Its findings were based the results of Section 166 reviews of the reporting function of regulated entities as well as feedback from its wider regulatory work.
The letter puts UK banks and building societies on notice that the PRA will focus intently on regulatory reporting and that firms now need to treat regulatory reporting with the same care and diligence as financial reporting.
The PRA’s letter draws attention to three key areas that many firms need to improve: governance, controls and data. When it comes to governance, the PRA recommends that senior managers at banks and building societies are provided with oversight of the effectiveness of front-to-back processes and cross-functional processes to ensure the delivery of accurate and reliable regulatory returns. This oversight needs to be supported by rigorous controls around operating models, with clear documentation of each stage of the process.
With regard to data, the letter notes that many firms have failed to prioritize investment in regulatory reporting and that they often focus on implementing tactical fixes at the cost of strategic ones. A lack of strategic investment lies behind the outdated reporting system infrastructure used by many firms; systems that demand significant manual intervention to fill data and technology gaps. Finally, the letter notes that many firms need to place greater focus on the robust sourcing of data; for example, to support the allocation of assets between exposure classes.
John Heavey, MDS Product Manager at RIMES, comments: “It’s clear that firms who treat regulatory requirements as a series of tactical projects will struggle to realize sustainable and scalable reporting processes. Given that regulatory reporting is driven by effective data management, companies that take a ‘sticking plaster’ approach to satisfy data gathering and validation for reporting will not be able to meet the PRA’s exacting requirements.
“Fortunately, creating a regulatory reporting function that is fit-for-purpose need not be an onerous task. The key is to build a data foundation that can serve any regulatory use case, rather than trying to create ‘point solutions’ for each individual requirement. Managed data services from experts like RIMES can help firms rapidly create this data foundation and governance excellence by enabling full visibility of their client and market data from source to report.”
If you are concerned that your regulatory reporting processes are not where they should be and would like an expert assessment of your data landscape contact RIMES today.
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