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As banks adjust to new financial regulatory requirements, third-party regulatory reporting platforms are crucial to managing evolving regulatory expectations. These platforms help organizations ensure compliance, manage risk, and achieve real-time insights into their financial health. These platforms' efficacy goes beyond mere compliance — they also support informed decision-making amid dynamic market conditions. The sudden failure of multiple regional banks in the United States in 2023 highlighted the importance of these platforms and their role in the future as banks navigate extreme financial stress that can materialize on short time horizons.
While market-leading regulatory reporting platforms offer impressive capabilities, they are only as strong as the data pipelines that feed into them. As regulations evolve, banks need more than regulatory reporting platforms — they need data strategies that comprehensively map their financial ledgers to the regulatory reporting software and evidence robust compliance with regulators.
Getting the Data Right
For many banking industry professionals, primary regulatory submission weeks come with a measure of added stress. Institutions spend vast sums to ensure the integrity of financial, liquidity, and regulatory reporting, and yet problems tend to come to a head as the regulatory submission deadline approaches. At that point, data from across the bank undergoes final approvals, signoffs, and comparisons. By then, it’s often too late to make significant changes to the data landscape, and poor data quality can result in hefty fines, resubmissions, and dreaded Section 166 reviews. (The PRA has initiated Section 166 reviews on different areas of regulatory reporting for all of the five largest US banks within the past five years, and one had to undertake a costly multi-year remediation program to address regulatory concerns.)
As regulations shift, preparing data for use by a regulatory reporting platform is a significant challenge for most banks. Instead of recognizing data gaps during the heat of a reporting cycle, banks need to proactively track how new and updated regulations will translate into new data fields. New derivatives of data attributes will always be required to keep up with the changes. The obstacles to enabling these new data derivatives will depend on the various source systems (both new and legacy) that capture the relevant data.
Achieving complete compliance will often require a combination of seamless automation and manual intervention. Automation tends to be more trustworthy, giving decision-makers the most agile, real-time, click-of-the-button data. It’s also more expensive because the data often sits in a complex network of new and legacy systems. Manual workarounds can be tolerable if unavoidable. However, they must be factored into the bank’s data strategy at the outset of any data-related transformation and monitored closely under the control’s framework. When analyzing severe but plausible scenarios – whether defined internally or by regulators – banks should be able to assess impacts on liquidity within reasonable timeframes and with limited manual interventions.
From Compliance to Decision-making
The first step to optimizing regulatory reports is to improve the underlying reporting platform through streamlined integration with complete data lineage. Streamlined data pipelines will enhance the platform's accuracy, increase confidence in the reported metrics, and reduce reporting cycle times, contributing to efficiency gains, cost savings, and robust regulatory compliance. When Wipro engages with banking clients in partnerships with regulatory reporting platforms, the focus is not only on providing a standard definition for each data point in the regulatory reports but also on providing a complete lineage back to the source systems from which the data points originate.
Banks can amplify the impact of streamlined data integration by embracing dynamic risk models. These models will allow banks to fully leverage their clean, real-time data in service of detailed scenario analysis. Banks will be empowered to adapt swiftly to changing market conditions and provide greater confidence to all stakeholders. The result is efficient reporting, strategic agility, and a readiness to navigate rapidly evolving capital concerns should a truly live-or-die moment arrive. Sometimes, the seemingly mundane act of streamlining data to serve real-time scenario analysis better may save a bank in a crisis.
As regulatory reporting platforms evolve, they will increasingly offer new insights through advanced analytics enabled by AI and GenAI. When paired with regulatory expertise, these new capabilities will be a game-changer for compliance, but they will also go much further than compliance. Banking leaders can draw on these platforms to build data-centric scenario analysis strategies that advance emerging business opportunities in times of growth and amid challenging market conditions.
The market for regulatory reporting platforms is expanding rapidly as banks seek more efficient compliance and data management solutions. They can be powerful enablers of regulatory compliance, provided that the bank is simultaneously advancing a comprehensive data strategy. Furthermore, in the right hands, their scenario analysis capabilities will increasingly play a role in other business use cases, from analyzing real-time market conditions to validating new revenue opportunities.
