RegTech Council Weighs In
A New Paradigm for Regulatory Change and Compliance
RegTech Council Weighs In
A New Paradigm for Regulatory Change and Compliance
May 2018
The objective of this paper from the RegTech Council (RTC) is to demonstrate how regulations can be processed using open-standards-based semantic technologies and regulatory compliance made more efficient and effective.
Specifically, this paper sets out to define the benefits such an approach can offer regulators and financial firms by mapping compliance imperatives onto impacted business activities. The primary requirement for the success of such endeavours is collaboration among financial institutions in creating a common language based on human and machine readable integrated regulatory and business vocabularies and rules.
The RegTech New Initiatives Working Group (NIWG) implemented a proof of concept using this approach in order to reduce the costs of regulatory compliance in investment banks. The NIWG includes senior executives from several global systemically important banks (GSIBs), RegTech vendors, and university researchers, with regulators acting in an observatory capacity. This paper describes the findings from the proof of concept and catalogues its benefits which go beyond cost savings. Enhanced data governance, quality, and accuracy will also accrue as both firms and regulators understand better regulatory rules and their impact on people, processes, technologies and data. Among other things, the paper concludes that:
- A new technology paradigm based on semantically-enabled digital and computational models can radically transform regulatory compliance change management.
- However, technology alone cannot solve the problem: A change of approach is necessary among regulators, firms and their suppliers.
- To support this change, common methods and technology design patterns are required, along with supporting capability models for good governance.
- The prize is significant and the faster the collective transition to this new paradigm, the greater the savings and the better the outcomes.
- Immediate action is necessary to transition from analogue to digital ways of working: if not, the gains made and ground taken will be lost, as will viable solutions currently in incubation, and costly, inefficient business-as-usual will continue to be the norm.
The Costs of Regulatory Change and Compliance
- $100BThe amount spent by banks on regulatory compliance in 2016¹
- $36BThe cost of Dodd-Frank implementation to date²
- 10%It is estimated that regulatory costs will rise from 4% to 10% of revenue by 2022²
1McDowell, H. (2017) ‘Banks spent close to $100 billion on compliance last year,’ (accessed 25th Oct, 2017), 2McNulty, L. (2017) ‘Compliance costs to more than double by 2022’
So what practically can be done? How can financial firms change their approach to regulations without having to spend even more significant sums on consultants, professional services and projects? And finally, how can this be done for the benefit of all stakeholders, regulators, financial firms, large and small and ultimately customers of financial firms?