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A building block for supervision: Transformation through RegTech

A building block for supervision: Transformation through RegTech

At the end of June, the EBA published its findings on the state of RegTech in the European Union’s financial sector. RegTech has been pinpointed as one of the topics of strategic priority for 2020/2021 as a key pillar of driving innovation. The EBA report findings are an effect of a number of surveys, workshops and interviews with both sides of the market coin: RegTech providers and financial institutions. The result is a report that not only delivers on the perspective of those who design and sell solutions, but also those who seek them, and the findings set the ground for a ping-pong discussion among providers and financial entities.

As a RegTech provider, we have to tackle…

According to the report, the challenges for RegTech providers include (but are in no way limited to):

1. Frequent changes to national and international regulations

To say that regulatory changes happen on a daily basis would just be scratching the surface of the matter. In this year alone (and it’s only July) we witnessed changes not only in the EU region (such as the new regime for investment firms) but also in the UK (such as plans to transform data collection and moving to XBRL reporting). The second half of the year and 2022 will be busy as well, with sustainability reporting moving closer to the horizon and amendments to already existing reporting frameworks.

2. Lack of harmonized legal and regulatory requirements 

Agreed! Just to quote a few lines from the report: 

“A lack of regulatory standards for technical requirements and data‐related standards or a lack of harmonisation of legal and regulatory requirements across the Member States could pose certain barriers for wider market adoption of RegTech solutions across the Single Market.” 

Harmonization poses a barrier not only at the operational level, but (as indicated by the EBA) also at the data level. With the volumes of data submitted each reporting period (and data points counted in thousands), the level of detail required in a reporting tool boils down to a molecular level. Along with frequent technical changes, the business analysts and IT teams are in for a tricky job. 

And a number of other challenges, such as providing financial institutions with the support they need, not only solution-wise.  

The EBA’s report provides an interesting insight into what are the common barriers to RegTech adoption not only for us as a solution provider. Given the findings, some challenges are similar on both sides of the coin, and some are not.  Definitely, there is a lot to talk about in the upcoming months. 

We will be jumping into more detail on the EBA’s report in upcoming publications, so keep an eye out for more!