What has happened?
The Financial Conduct Authority (FCA) has launched a call for input, asking for information in respect of to the application of technological advances and their potential to facilitate regulatory reporting for firms.
What does this mean?
As part of its efforts to improve the reporting process, the FCA sometimes conducts ‘TechSprint’, which bring together financial services providers, technology firms and subject matter experts, to develop solutions to regulatory challenges.
In November 2017, the FCA and the Bank of England held such a TechSprint, which looked at how technology can make the regulatory reporting system more accurate, efficient and consistent.
The TechSprint saw the successful development of 'a proof of concept' to make regulatory reporting machine-readable and executable, by creating a language that machines could understand, therefore removing the need for human interpretation.
"Machines could then use this language to automatically carry out (execute) the rules [within the FCA and the PRA Handbooks]. Once the rules were translated, machines were able to fulfil the requirements by assessing the information required and then pulling this information directly from a firm’s databases," the FCA explained.
The TechSprint also simulated a rule change in the FCA Handbook in real time and saw the machine automatically changing the reporting data.
Commenting on the call for input, Hogan Lovells Technology partner John Salmon said:
"This is a really good initiative from the FCA. When you see the number of scheduled regulatory reports are now at more than 500,000, it makes sense to try and use technology to make reporting more efficient."
Many firms find it difficult to meet their reporting obligations, as the type and amount of information they must send to the FCA can vary wildly depending on the firms' size and type.
Firms also need time to interpret and implement policy changes and delays therefore ensue between when the FCA decides it needs specific information from firms and receiving that information.
The delay increases the need for the FCA to make ad hoc requests for information, adding to the compliance burden.
The FCA therefore hopes that applying technological solutions to the reporting process will bring many benefits, from improving the accuracy of data submissions, reducing the cost of compliance and making the process faster and less onerous.
A reduction in compliance costs would also lead to lower entry barriers and therefore promote competition.
In addition to views on how the process can be enhanced, the FCA is also seeking feedback on broader issues around the role of technology in regulatory reporting.
“The data received from these regulatory reports are critical to our ability to deliver effective supervision, monitor markets, and detect financial crime,” explained the regulator, which receives more than 500,000 scheduled and ad hoc regulatory reports from firms every year.
The call for input will be of interest primarily to regulated firms, RegTechs, FinTechs, technology and software providers, professional services providers, academics with interests in technology and financial regulation and financial services regulators.
What happens now?
The call closes on 20 June 2018 and the FCA will publish a feedback statement summarising the views gathered and the next steps in summer 2018.
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