BUSINESS brief Data Management and Analytics Financial Services

Keeping Pace with the Demands of Financial Regulators Technology as a Strategic Approach to Regulatory Reporting “[The] appetite from supervisors for more granular data has been growing since the start of the financial crisis… Although short term cost and time pressures may force firms to adopt tactical solutions, it could well be more effective to take a more fundamental, strategic approach in 1 the medium term.” Industry Strategic Challenges The financial services industry is under constant pressure from financial regu- lation bodies worldwide to ensure the integrity of the global financial system. Financial services firms are subject to requirements, restrictions and guide- lines by government as well as non- government regulatory organizations and policies. These can include the PRA (Prudential Regulation Authority) and FCA (Financial Conduct Authority) in the UK, which oversee the implemen- tation of European reporting require- ments like FINREP and COREP and the Basel Accord, and the Sarbanes-Oxley Act of 2002 in the United States. As part of these requirements, finan- cial institutions are obliged to report periodically—whether daily, monthly, quarterly, or annually—to the various regulators. These regulatory reports may contain raw or summary data needed by the regulators to evalu- ate the safe and sound condition and operations of a bank or other financial institution or to determine compliance with any government act or other law, rule, or regulation. Adding to the complexity of regulatory reporting are the volume and variety of data required as input for reporting purposes; the number of people with access to and responsibility for the data; and ad hoc reporting demands for stress and scenario testing. Data and Regulatory Reporting A wide spectrum of data sources now needs to be ingested and correlated with existing data to provide even deeper levels of insight for the purpos- es of creating reports for the regulators. Typical data sources/types include, but are not limited to • Trade data from trading systems • Reference data • News feeds • Social media • Legal documentation (typically in XML format) • Industry ontologies like FIBO (Finan- cial Industry Business Ontology) and FIGI (Financial Instrument Global Identifier). • XBRL filings to the regulators • Spreadsheets All of this data needs to be viewed, ana- lyzed, and correlated holistically. Given the variety of data types and sources and the speed with which it needs to be manipulated, traditional relational databases are simply not up to the task. Technologies such as MarkLogic* Enterprise NoSQL Database are now available and able to provide a more efficient and effective platform for data management. Keeping Pace with the Demands of Financial Regulators 2 Data and Roles and Responsibilities In addition to the variety of data and sources, the number of roles within a bank infrastructure linked to the data is considerable. The responsibilities of those roles and the way they access that data vary, but it is vital that they work as a collective in order to ensure that data and processes are compliant with the regulations and that regula- tory reports are produced efficiently and accurately. Examples of these roles include • Compliance Officer • Regulators (within the banks) • Research Analysts • Settlement and Clearing Staff • Reference Data Operations • Internal and External Auditors Stress Testing As if the periodic reporting require- ments were not enough, banks can be subject to ad hoc reporting demands for stress and scenario testing. Regulatory stress testing is rapidly emerging as one of the most powerful tools for determining bank capital levels. Stress testing analyzes the impact of a variety of unfavorable economic scenarios to determine whether a bank has enough capital to withstand the impact of adverse developments. In Europe, the Euro- pean Banking Authority (EBA)