A-Team Insight Blogs

UK FCA Targets up to £4 billion of Reporting Costs via Transforming Data Collection Initiative

The Financial Conduct Authority’s involvement in the Bank of England’s Transforming Data Collection Initiative is aimed at reducing industry reporting costs of as much as £4 billion, according to FCA CEO Nikhil Rathi. The initiative – launched in February – aims to deliver improvements in data collection over the next decade.

Speaking last week at the Lord Mayor’s Banquet at London’s Mansion House, Rathi said the FCA expects to invest £120 million over the next few years to maximise its move to the cloud, while at the same hiring “significantly more” data scientists and data analysts. “Regulatory reports are estimated to cost between £1.5 billion to £4 billion a year, with 20,000 rules across 58,000 firms,” he said. “That’s why we’re working with the Bank of England on the Transforming Data Collection Initiative. By standardising data and leveraging new technology at scale, regulatory reporting can be delivered faster and at lower cost.”

The Transforming Data Collection Initiative – which plans to use a blockchain-based reporting mechanism – has been designed to ensure the Bank of England “gets the data it needs to fulfil its mission, at the lowest possible cost to industry.” According to the Bank, the initiative is based on three key elements:

  1. Defining and adopting common data standards that identify and describe data in a consistent way throughout the financial sector. These common standards should be open and accessible for use by all who need them. The bank believes their adoption will bring benefits well beyond reporting.
  2. Modernising reporting instructions to improve how our reporting instructions are written, interpreted and implemented. There are a range of steps the bank thinks this will involve, from setting up better Q&A processes to potentially rewriting bank instructions as code.
  3. Integrating reporting to move to a more streamlined, efficient approach to data collection. This reform includes making data collection more consistent across domains, sectors and jurisdictions, and designing each step in the data collection process with the end-to-end process in mind.

Meanwhile, in his Mansion House speech, FCA’s Rathi referenced the regulator’s involvement in several other digital programmes and initiatives. These included resumption of testing of the Global Financial Innovation Network, which involves 23 regulators globally, including recent additions Reserve Bank of India and Australian Prudential Regulation Authority. Rathi also said regulated entities are now able to experiment using the FCA’s own regulatory sandbox, which recently supported “the first authorised investment firms using Distributed Ledger Technology to tokenise securities. It [also] supported Digital ID solutions and more than 20 Open Banking tests. More than 700 firms have used our Innovate services including the regulatory sandbox, direct support and advice unit, with the regulatory sandbox serving as a blueprint for 44 regulators globally.”

Rathi also said FCA this year joined the Digital Regulators Cooperation Forum (DRCF), a partnership with Ofcom, the Information Commissioner’s Office and the Competition and Markets Authority. “While we have independent powers and objectives,” he said, “we will achieve them more effectively by deeper cooperation and developing common capability, including in artificial intelligence and data ethics. We will shortly announce the DRCF’s first CEO.”

Finally, Rathi said the regulator will be looking to regulate “more data-heavy businesses, and as demand for data increases, firms may be able to use, market or restrict data in ways which create poor user outcomes. Our wholesale data Call for Input showed that some market participants believe trading data licensing fees are too complex, benchmark switching costs too high and data vendors are subject to high barriers to market entry. We’ll be publishing feedback before the end of the year and setting out what further steps we may take, considering the full range of our powers.”

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