By Alice Allegrini is Sales Director at Tagetik
Efficient corporate performance and financial management technology helps banks avoid pitfalls and focus on revenue, profitability and process optimisation instead
Regulatory reporting requirements are something all industries have to contend with but there is probably no industry that has more regulatory reporting requirements than finance. Regulation in the banking industry has increased significantly since the financial crisis, and the cost and time resources associated with keeping in line with these rules have left many firms scrambling.
FinRep, CoRep and Pillar 3 of Solvency II are the most recent examples of regulatory regimes that banking and insurance companies need to comply with. And, given that regulatory reporting is mandatory, it is how banks choose to address it that makes the difference of adding or decreasing value for them.
The pitfalls of handling data manually
When it comes to financial reporting, banks still rely too much on spreadsheets for the collection, entry and verification of data and these require manual intervention and adjustments that consume a lot of staff resource. Reporting needs to be repeatable and auditable on a regular basis, and the evolving nature of regulation means future-proofing will always be required of the software.
The attached infographic, based on research sponsored by Tagetik, shows that banks spend 50% of their time preparing regulatory reports when they should really only be spending 20%. Consequently, they are sometimes left with no choice but to pass compliance costs along to customers by reducing existing products and services (44%), postponing or cancelling new product launches (58%) and increase service fees (42%).
A robust, automated system centred on a reporting database enhanced by Big Data analytics is the optimal choice to overcome these pitfalls as it provides an easy-to-use and timely single version of the truth.
Turn regulatory reporting into an opportunity
Banks can choose to view reporting solely as a cost of doing business and address it by implementing another stand-alone solution with data feeds from other systems. However, these feeds create yet another set of redundant data that needs to be maintained and vetted against financial statements. Or alternatively, banks can choose to look at regulatory reporting as an opportunity to be just an additional output from a single trusted reporting platform. An integrated system minimises data redundancy, integration requirements and tedious (and error prone) vetting of regulatory reports to your financial statements. It also reduces time and resources to produce, maintain and support the regulatory reporting process and provides a new level of collaboration, accountability and analysis that will never exist in a stand-alone approach.
Banks should endeavour to turn the burden of regulatory compliance into an opportunity to be a change agent. It is easier to get budget approved for a mandated compliance requirement so banks should use this to their advantage and use that budget to address more than just a one-off compliance need. Spend can be turned into a way to reduce the cost, risk and duration of the broader reporting process and increase the time spent on analysis and modeling of actions that actually impact the bottom line.
Many regulatory reporting requirements are standardised and fortunately this makes automation a realistic proposition. Regulatory regimes like FinRep and CoRep in Europe require specific data feeds, calculations and report formats that can be predefined with built-in controls and validations.
With regulatory deadlines always looming, if you are a bank and have not yet automated your regulatory reporting you need to get moving. Automate now to reduce cost and risk and not spend too much time handling data manually. This strategy is more expensive, more time consuming, and less accurate.