Five tips for simplifying your regulatory reporting process

Dec 20, 2021

Few Banks and Financial Institutions can say that they have 100% confidence in their regulatory reporting processes, or that they don’t see compliance as a tedious and expensive affair. Most banks, especially small and mid-sized ones, are constantly between a rock and a hard place when it comes to dealing with compliance. On the one hand, the race to satisfy the evolving demands of regulators can get quite tiresome. But on the other hand, if banks don’t keep up with their regulatory standards, they stand to accumulate steep penalties and lose trust both among their regulators and the general public.

Banks and Financial Institutions have a rich array of third-party reporting solutions available to them to leverage for their reporting needs, yet there is still a tremendous amount of manual and tactical processes, which are performed as a prelude to and post generation of the reports. There appears to be a herculean task to get the regulatory reports out on time with no scope for errors to circumvent possibilities of a reputational and credibility loss for the institutions.

Regulatory Reporting Challenges

1. Gaps in Regulatory Data Preparation & Adjustments 

Analyzing the data information needs of regulatory schedules and templates can be a time-consuming and challenging process. Most of these would be available in the banking relational data store, but there could be a few that may need exploration on a data lake or upstream systems. Banks currently do engage their Business DataAnalysts to do this but can be an intensely painful exercise, which could be more effective with some acceleration.

2. Authentication of Data Captured outside of the transaction

Interpretation of Regulatory reporting guidelines is a very domain-intensive and intellectually engaging task with Financial Institutions spending a lot of time, effort, and resources to ensure they are not being pulled up for noncompliance or MRAs post their regulatory submissions.

Even with the advancements in IT and Application technology, in most financial institutions, we still have some of the data going into the final reports via manual intervention due to limitations of the business processes. Most of the non-automated tactical feeds are adjustment figures, which are sent to regulatory teams through spreadsheets and encompass field-level information that exists outside of the transactional data captured. A multitude of third-party systems needs to be referenced for reconciliation. Though over the years the controls established on these processes have matured, these non-automated feeds are still prevalent and are extremely time-consuming to process.

3. Build Your Audit Trail of Information Captured

Kyzer TFRS doesn’t just send reports to regulators; it takes control of the entire reporting process from the moment a transaction is updated until the report is submitted, revised, and accepted. It can combine data from multiple sources, format regulator-ready reports following several different regulations, receive and ingest regulator responses, make simple edits on a field-by-field basis, maintain audit trails, and more, all with just a few clicks. TFRS is entirely exception-based, allowing for low-risk, high-accuracy, streamlined reporting. Audit trails – all checks are stored and accessible anytime throughout the reporting process and for archival.

4. Least Manual Intervention based process

The recommendation to leverage various data extraction methods customized as per the bank’s policies, core and allied systems, that can read and analyze the data attributes in the upstream systems and recommend the likely mapping of the source element to the target fields of the data model maintained for respective Regulatory Reports.

Though this process cannot be fully automated at the outset, the algorithms over some time with feedback and validation from regulatory responses, are aimed to gain accuracy and bring a greater degree of acceleration to this process over some time. This will considerably fasten the process of data preparation and adjustments and provision greater time to the regulatory team for analysis of the Reports.

5. Data Retention for Resubmissions if needed

Variance analysis is an important process of Regulatory reporting to ensure that there are no major variances in reporting from one submission to another and even if there are variations, the Financial Institution is aware and can attribute it to a known business factor. Even though the process of analysis is in itself not very time-consuming, it needs to be very diligent with little or no scope for errors.

Business users in regulatory reporting teams are required to create a Management summary report both for review by the Internal Management team and for review by the Regulators. And depending on the sensitivity of the data, a public, private or hybrid cloud can be used for hosting the Regulatory reporting infrastructure.

The objectives at all times should not only be reduced costs of compliance but also assurances that the regulatory transformation is aligned to the enterprise business strategy—and also making the regulatory infrastructure nimble enough to respond to any incremental regulatory asks, future-proofing the business to the maximum extent possible.

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