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:
The amount spent by banks on regulatory compliance in 20161
The cost of Dodd-Frank implementation to date2
It is estimated that regulatory costs will rise from 4% to 10% of revenue by 20222
1 McDowell, H. (2017) ‘Banks spent close to $100 billion on compliance last year,’ https://www.thetradenews.com/Sell-side/Banks-spent-close-to-$100-billion-on-compliance-last-year/, (accessed 25th Oct, 2017).
2 McNulty, L. (2017) ‘Compliance costs to more than double by 2022’ https://www.fnlondon.com/articles/compliance-costs-to-more-than-double-by-2022-survey-finds-20170427
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?