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How 2024 will be a Monumental Year with Evolving Regulatory Requirements

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By Leo Labeis, CEO at REGnosys.

This year will be uniquely busy with numerous changes to global reporting regimes. This article explores the changes firms need to be aware of and how RegTech solutions can help them stay ahead of the curve.

RegTech is one of the fastest advancing areas of fintech with the global market expected to reach $41 billion by 2030 and annual spending to reach $200 billion by 2028. Sector growth is particularly evident across regulatory reporting, driven by G20 regulatory reforms, but 2024 represents a sea change in the regulatory calendar, with significant changes coming across six jurisdictions.

These changes have provided the impetus for financial institutions to review their regulatory reporting setup and according to Deloitte’s 2023 RegTech Universe, regulatory reporting has now become the largest subsidiary of RegTech.

With regulatory compliance at the top of the agenda, how can firms leverage RegTech to stay ahead of the curve.

A uniquely busy regulatory calendar

A key talking point this year is the uniquely busy regulatory calendar. The world of regulation isn’t known for its rapid speed of development, but over the next year, several reforms to global reporting regimes will reach their compliance deadlines.

These include the implementation of CFTC Rewrite 3.2, and EMIR Refit – both European and UK versions, and reforms from the Japan Financial Services Agency (JFSA), Monetary Authority of Singapore (MAS) and Australian Securities and Investments Commission (ASIC), making 2024 a genuinely pivotal year in the regulatory landscape.

The need to comply with these evolving regulatory requirements has been a key driver behind the growing appetite for regulatory reporting solutions. According to Grant Thornton, 65% of regulated firms anticipate more regulatory obligations in 2024, with regulatory reporting in the top five areas that financial institutions are prioritising in their RegTech budgets. As a result, we can expect more firms to turn to RegTech solutions to help them comply with the new standards.

A more strategic approach to data management

Digital Regulatory Reporting (DRR), an industry-wide initiative to make regulatory reporting more efficient and effective, provides a clear example of how new technology can help financial institutions navigate these upcoming regulatory changes.

Using a legacy approach, reporting firms face an array of overlapping, often ambiguous and ever-changing data requirements across jurisdictions. For every reporting regime, firms must typically sift through hundreds of pages of legal text, which they must then manually interpret and code in their IT systems. According to the Bank of England, regulatory reporting is a significant burden, costing UK banks a minimum of £2 billion to £4.5 billion annually.

DRR allows market participants to work together to develop a standardised interpretation of the rules and store it in an openly accessible format as both human-readable and machine-executable code. This is a marked shift from the current process where every reporting firm creates its own reporting solution, inevitably resulting in inconsistencies and duplication of costs.

Learning lessons from the CFTC Rewrite

After going live for CFTC Rewrite reporting in December 2022, DRR is now in user acceptance testing (UAT) for EMIR Refit and JFSA changes, which are both going live in April 2024.Importantly, this means that firms that adopt DRR early in the cycle, starting from the first stage of the revised CFTC rules, will accumulate the largest benefits on their initial implementation.

ISDA estimates that 70% of the CFTC and EMIR requirements are identical. In turn, CFTC and EMIR taken together cover most of the other jurisdictions’ requirements, meaning firms adopting a truly global strategy can leverage their work in each area.

DRR natively supports key updates to the requirements being implemented globally, such as the Critical Data Elements (CDE), the Unique Product Identifier (UPI) that went live this month in version 3.2 of the CFTC and reporting in the mandated ISO 20022 format.

As firms begin this busy regulatory calendar year, they should review what worked well in their CFTC Rewrite implementation and apply successful methods to the upcoming regulatory reforms.

While technology-driven solutions may have once been seen as a ‘nice-to-have’, we can expect more financial institutions to have a much stronger intent to move away from traditional systems and implement full RegTech strategies. Part of this strategy should look to leverage new collaborative solutions to digitise reporting requirements in a transparent, standardised, and cost-effective way.

The future of regulatory reporting is now – firms should begin transforming their reporting operations sooner rather than later.

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