Data: the silver bullet that hits regulatory moving targets

By Nelson Wootton
Changes since the collapse of Silicon Valley Bank (SVB) have left banks in the “shackles” of regulation, writes Nelson Wootton, Founder and CEO of SaaScada

The banking world has spun into turmoil this year. The sudden collapse of Silicon Valley Bank (SVB), Credit Suisse, and First Republic Bank sent shockwaves through the FS industry, revealing just how quickly risk can affect financial institutions around the world. The bumpy ride has also led to regulators upping the ante on banks’ compliance requirements. And while banks’ regulatory reporting doesn’t often make headline news, the story even caught the eye of US President Joe Biden – who called for new, stiffer regulations after global financial stability was put at risk.

Banks are now having to respond to more disruption, more often. And while regulations are essential to protect consumers, it’s difficult for banks to keep up with constantly moving regulatory targets. With the increasing demands being placed on compliance and risk functions, it’s even harder for banks to juggle the need to keep up with regulation whilst simultaneously delivering innovation to meet real customer needs. Banks need a silver bullet to hit the moving target – to speed up reporting, reduce the risk of non-compliance, navigate uncertainty, and keep consumers safe ‒ without compromising innovation. Surely, the best weapon is data. Real time data can deliver immediate MI to streamline risk and compliance activities.   

Tightening the grip on regulation

Following SVB’s collapse, UK regulators are considering updating the Financial Services Compensation Scheme (FSCS) to tighten liquidity rules and improve deposit protection, leaving lenders scrambling to keep up with the changing rules.

This might feel like déjà vu from 2008 for banks. There were extensive reforms after the financial crisis – for instance, the UK created the Financial Policy Committee to identify, monitor, and mitigate financial risks, as well as ensure that the regulator takes a holistic approach to safeguarding financial stability. But remaining compliant also comes at a cost. It’s estimated that post-2008, operating costs spent on compliance have increased by over 60% for banks, which is stifling innovation and growth.

Banks are struggling to navigate a regulatory minefield

Regulations are critical to ensuring system-wide stability and are an essential tool to protect consumers. Yet keeping up with these requirements is more demanding and time-consuming than ever.

Many banks are failing to address a shortfall in their technology capabilities which means they are struggling to keep up with ever-changing regulations. FS firms are often reliant on legacy technology, where key information is locked in silos or spread across a web of interdependent systems. As a result, reporting is disjointed and convoluted and banks struggle to gain a clear understanding of their risk.

Banks can free themselves from the “shackles” of regulation and stop it from slowing growth if they take steps to improve data quality and streamline the reporting process. But with banking reform looming, how can they surface the data they need to prevent being buried under regulations?

Preparing for the worst

As the regulator continues to move at speed, banks must be able to plan for the worst-case scenario. Banks should connect the dots between their systems to ensure they have the real-time data on the desks of people who need it, when they need it. By adopting a core banking model that relies on event-sourcing architecture, firms can create a real-time stream of events for each customer account. This will offer the transparency that FS firms need to make data-driven risk assessments and conduct scenario planning as reporting demands tighten.

Data also enables banks to create and analyse possible futures and outcomes, helping them to better understand their vulnerability to disruption and develop contingency plans to build resilience.

Banks can also look to streamline the reporting process to stay on the regulator’s good side. With a 360-degree view of the customer and business operations, banks can create bespoke datasets that enable automated and customisable reporting. This improves the accuracy and timeliness of reporting, helping firms to easily access data to make informed risk assessments – and crucially navigate uncertainty.

With access to better data, firms won’t just be more compliant and resilient – reporting will become much more efficient too, saving precious time and resources which can be redirected into building new products and services. This will help FS firms to gain the edge over competitors while they are left trying to piece together reports from siloed data.

Out of data darkness

SVB’s collapse has led to regulators becoming increasingly concerned that there are ticking timebombs elsewhere in the financial system. As risk and compliance are top priorities for the board in any FS organisation, leaders need to have tough conversations to make sure they’re prepared for upcoming changes – or be at risk of costly fines and reputational damage.

Business leaders need access to real-time data to help automate reporting, conduct scenario planning, and proactively identify vulnerabilities. Armed with the right data, banks can pierce the darkness that shrouds disjointed and complex systems to deliver clear and objective business information to drive reporting and scenario planning. And with the industry facing unprecedented financial risk, banks must uncover their weak spots to ensure that they are doing everything in their power to prepare for the worst.

About the author

Nelson Wootton

Nelson Wootton is Co-Founder and CEO at SaaScada. Nelson has over 25 years of experience in software development with expertise in 16 software languages at ‘C’ level in start-ups and SMEs. Nelson was involved in the scaling of businesses such as iRIS, Axcess Canada and Facewatch.


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