A new preliminary report launched today titled ‘Strong Foundations for Regulatory Reform?’ finds that the monetary implications for financial services firms that fail to establish a more consistent data management plan can be immense. While there is currently no public sector assessment of the cost to comply, initial research studies suggest it will be in the region of $390 million per firm over the next five years**. The report, due out in September 2011, also finds the extent to which the industry defines global data standards to meet G20 regulation will be a key issue affecting the total cost of compliance.
The preliminary report was authored by regulatory think tank JWG and was presented to an audience of 70 banking professionals at an event in London during July. The event, which was sponsored by DataFlux, a leading provider of data management solutions, analysed the wide range of regulations designed to introduce greater stability into the banking system.
JWG analysed over 35 separate regulatory documents from the new global regulatory regime consisting of over 1,200 pages. Documents included the Financial Services Authorities’ ‘Enhancing frameworks in the standardised approach to operational risk’ and the Securities and Exchange Comissions’ ‘Swap data recordkeeping and reporting requirements – Pre-enactment and transition swaps’. Findings point to the inclusion of similar data management requirements within the various new regulations and calls on financial institutions to address the requirements during the formation of the standards that will be used to manage data and report to regulatory authorities.
PJ Di Giammarino, CEO JWG commented: “The point is simple. Without a new ‘global regulatory data architecture’ and data glossary to back it up, decisions on the riskiness of trades, positions, clearing arrangements, net stable funding ratios and counterparty exposures will be more difficult, risky and expensive.” He continued: “Firms have a great chance to step up now in order to help define standards for the way data is governed within their industry and is presented to regulators. The extent to which firms rise to this standards challenge will have a significant impact on the total cost of compliance with the G20’s regulatory regime.”
Colin Rickard, EMEA Business Development Director, DataFlux, commented: “While there is a pressing imperative to define global data management standards, this report clearly articulates that firms must take action now. Regulators are asking financial institutions to not just present a set of reports but to also have systems in place that can guarantee the accuracy and validity of the underlying data.” He continued: “The onus is on the industry to demonstrate it can show an audited path for the flow of data within the organization, and that checks and balances are in place throughout the data lifecycle.”
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