Banks Kept On Their Toes By Dizzying Data Management Regulations

Data management is becoming an increasingly pressing concern for most financial institutions, as bank regulations continue to shift around the globe, according to new research.

A report released last week by Wolters Kluwer’s Finance, Risk & Reporting, developed in conjunction with Risk.net, surveyed banks across the EMEA, APAC and North America regions to understand how financial institutions are approaching the complex area of data management, as regulations continue to evolve around data protection, ownership and sharing.

In its survey, Wolters Kluwer found that approximately 90 percent of banks say they have major concerns about data management. Only 10 percent said they were neutral on these concerns. Not a single bank said they had “no concerns” regarding data management.

Nearly half (42 percent) of banks told researchers that creating an integrated, consistent view of their data across the organization is their largest challenge in relation to data management. Interestingly, only 3 percent said disruption from emerging FinTechs was the top hurdle. Nearly a fifth (19 percent) said the struggle to keep up to date with the pace of regulatory change is their biggest challenge, while 20 percent said it was keeping to respective regulatory deadlines and 16 percent cited the demand for more detailed, granular data bank to regulators and senior management was a hardship.

Banks aren’t denying that their internal systems and infrastructure may not be as helpful as they should be in overcoming these challenges, either.

According to the survey, nearly 70 percent admit they have grievances with multiple legacy products, which are build on varying technologies with “inflexible” support.

Regulatory Headaches

Regulation over data management is similarly a rising concern for banks, with 60 percent citing achieving data requirements as their top compliance hurdle. A fifth cited regulatory reporting and a fifth said complex real-time analysis were their major concerns.

Wolters Kluwer also warned that only 17 percent of survey respondents said they have the proper systems and procedures in place to support their data-related compliance initiatives, while the remaining 83 percent noted they are “planning to work on achieving suitably robust systems and procedures in light of mounting global regulatory challenges.”

It’s perhaps not surprising that data management and regulations relating to it are such a concern for banks today. In a statement, Wolters Kluwer’s Finance, Risk & Reporting Global Head of Strategy, Product and Platform Management, Rajat Somany, said that regulations are becoming ever more complex.

“Global and local regulators are demanding ever-greater integration across business processes, more invasive and broader scope in management and reporting and faster reaction to change of regulations,” Somany stated. “The survey findings demonstrate that banks are fully aware of the data challenges and now need to put plans in place to ensure their systems are up to the task.”

When considering the specific regulations at the front of banks’ minds, most cited were International Financial Reporting Standard 9 and 16, as well as the Current Expected Credit Loss Standard, with nearly half of survey respondents pointing to these financial standards — which have yet to come into effect — as having an influence on IT resourcing.

The Fundamental Review of the Trading Book’s implications for implementation of technology is another regulation banks are watching closely. A fifth of banks, however, said they would be focusing their attention on local regulatory changes ahead, rather than global ones.

Rising stress over how banks handle data comes as global regulators move to address two key trends in the financial services market: data sharing, a key focus as many FinTechs enter the market and emphasize customers’ financial data ownership to share data between services and platforms; and data privacy and protection, as data breaches and cyberattacks continue to land in national and international headlines.

Cyberattacks, especially, are a rising concern for financial institutions (FIs). Reports this month said some U.S. banks have begun to prepare for a catastrophic cyberattack: A project called Sheltered Harbor sees participating banks and credit unions sharing the data they have with other members in the project so that it can be used by other institutions in the event of a debilitating cyberattack.

Meanwhile, in Europe and the U.K., banks are gearing up to adhere to upcoming PSD2 and GDPR regulations that address data sharing, protection and ownership as well. Analysts at Deutsche Bank recently released a report acknowledging uncertainty and confusion around implementation of many overlapping regulations.