BR-AG | Senior Business Analyst, Practice Lead
The financial regulatory frameworks of the United Kingdom (UK) and the European Union (EU) are increasingly diverging due to changing approaches to overseeing financial markets within these jurisdictions.
Given the UK’s ‘regulatory freedom’ by diverging from EU regulations and the ongoing evolution of the EU legislative program aligned with its own domestic policy agenda, the complexity and cost of regulatory capacities for international institutions are increasing. While regulators strive to keep the reporting burden for smaller financial institutions reasonable, larger international institutions operating in more than one jurisdiction focus on developing a comprehensive approach towards cross-border governance, risk management and compliance.
Reporting frameworks for banks in the EU and the UK change each year and the pace of that change is accelerating, fueled by consumer expectations, digital maturity, and sustainability goals commitments. To remain compliant, banks need to constantly monitor all the updates and adapt their data workflows accordingly.
The UK government is enacting an extensive array of regulatory proposals for the oversight of financial services within the country, encompassing regulations for both the banking and insurance sectors.
In particular, the Bank of England (BoE) has decided to postpone implementation of the final parts of Basel III, known as Basel 3.1 in the UK, by six months to July 2025. At the same time, the Prudential Regulation Authority (PRA) has decided to shorten the transition period for the phasing in of the output floor by six months, so that the transition period will still end on 1 January 2030.
Many banks still have substantial tasks ahead in their Basel 3.1 programmes, especially in areas such as establishing requirements definition, developing data sourcing streams and systems architecture design, as well as building and implementing RWA (Risk Weighted Assets) calculators that are capable of coping with the new requirements for Standardised Credit, Market and Operational Risk RWAs.
To comply with Basel 3.1 regulatory reporting, banks may also face a challenge in sourcing data of the required quality and granularity. Generating this data will likely necessitate increased interaction and coordination among the front office, risk, and finance functions.
Additionally, the UK must adapt to yet another evolving landscape, stemming from the post-Brexit Insurance reform initiated after the country’s departure from the European Union on December 31, 2020. This reform entails a shift away from the EU’s Solvency II regime, with the UK adapting Solvency II to the needs of the UK insurance market.
On June 2023, the BoE unveiled the first tranche of changes to rules governing the UK insurance sector, marking a notable reduction in bureaucratic procedures compared to the inherited EU framework.
In relation to the internal model, the regulator will apply a “principles-based” approach to its supervision of companies’ capital calculations, removing most of the requirements set by the EU in a reflection of the differences across member states. The cost of and time demanded by current rules have already formed one of the key concerns voiced by insurance executives.
Even when regulations don’t change, large banks do by becoming bigger, more diverse, and more complex in organizational structure, business operations, and tech infrastructure terms. Whether it’s a merger or an expansion of its business presence, a major internal shift can suddenly expose the bank to a whole new set of regulatory concerns.
Operating across different markets they need to orientate and react fast to reporting requirements, collect and process required data internally and convert to compliant reporting that is still deemed as a wide concern.
The BoE’s “Future of Finance” report estimated that compliance with regulatory reporting costs UK banks £2 billion–£4.5 billion per year. The UK regulators have a longer-term ambition of streamlining regulatory reporting and making data collection and usage more efficient for themselves and the banks. At the same time, regulators still ask for more data. This means that banks have not only to prepare for the regulators’ longer-term ambitions but also – and much more immediately – to meet their current expectations investing in upgrading their regulatory reporting infrastructure and improving data quality.
The importance of this question has intensified with the quantum leap made in using of advanced technologies by financial sector actors. Furthermore, heightened stakeholder expectations and reduced tolerance for maintaining manual processes within regulatory data and change management chains have added an extra layer of urgency.
Leveraging the capabilities of regulatory technologies banks aim their efforts to level up the most critical areas, among which are:
- Implementing Reporting Data Lifecycle needed to rely on a single source of truth of their reportable data, with precise definitions according to regulatory models and standardized gateway for internal data collection to gather the data for the compliant report and ensure reliable validation before submitting to the respective authority.
- Automating Regulatory Change Management to capture all updates, highlight new and changed data requirements in the internal data systems. This means that whenever there is an update or a new requirement, banks get a comprehensive change log, diff log, in a prompt manner.
Tapping into these challenges, we designed the ATOME Platform to equip banks with a powerful RegTech solution as a lever to build best-in-class data management and governance practices for achieving regulatory compliance.
ATOME Platform is continuing to help banks overcome their complex data challenges gaining a worldwide recognition. We take great pride in being shortlisted by prestigious Banking Tech Awards 2023 in the category of ‘Best Digital Solution Provider – RegTech’!
More specifically for the global banks, ATOME Platform offers advanced capabilities to cater to the diverse reporting requirements of large entities, with complex organizational structures and multi-jurisdictional operations. These entities focus on developing in-house data consolidation or data pipeline mechanisms and prefer engaging external reg-reporting components only for the ‘last-mile’ reporting.
To meet these demands, ATOME helps to:
- Leverage Regulatory Models: The platform empowers teams to leverage existing regulatory Data Point Modelling (DPM) models from authorities like the EBA in the EU and the BoE in the UK. This enables entities to drill down to their internal chart of accounts and data structures while maintaining their custom ‘extensions’ of regulatory DPM.
- Streamline Production of Regulatory Reports: By integrating the data input and validation process through the API (Application Programming Interface), ATOME minimizes human intervention, reducing the risk of errors. This streamlined approach ensures efficient and accurate production of regulatory reports.
Get in touch with us to discover more use cases and benefits ATOME brings for data management: