The UK Financial Services Authority (FSA) has recently released a paper discussing the feedback it has received from the market with regards to its proposals around the verification of the single customer view (SCV) for deposit taking institutions. The reforms, which are aimed at facilitation a single, consistent, view of an eligible claimant’s aggregate protected deposits with a deposit taker as part of the Financial Services Compensation Scheme (FSCS), will likely result in significant data challenges for financial institutions attempting to aggregate this data.
Moreover, this data will need to be aggregated in a fairly short timescale: it needs to be produced within a period of 48 hours after a deposit taker (banks, building societies and credit unions) goes into default. The FSA notes that this will involve an IT investment: “The production of an electronically submitted SCV will require systems changes, including the flagging of eligible accounts, data cleansing and collation of the information required in a format which is capable of being submitted to the FSCS electronically.”
Overall, the industry has been rather slow to respond to the FSA’s proposals, which were published in consultation paper CP09/16 in June. The regulator indicates that it has only received six responses in total to the paper, most of which were “supportive” of various aspects of the proposals. The British Bankers’ Association (BBA), the Building Societies Association (BSA) and the Association of British Credit Unions Limited (ABCUL) provided the most detailed responses, says the FSA. This likely means that the implementation of the changes will take place as planned and firms will have to fully comply with the SCV reporting requirements by 31 January 2011.
Those hoping to escape the requirements by falling into the smaller firm category, which involves holding fewer than 5,000 accounts, will also be dissatisfied. The FSA has confirmed that they will still need to be able to supply the relevant information even if they fall below the threshold for electronic submission of the data. “These ‘smaller deposit takers’ would still have to be able to supply the information contained in the SCV table to the FSCS within 72 hours of a default or of a request from the FSA or the FSCS,” the paper states.
The SCV has been estimated to cost £1 billion to implement and the FSA will be making sure, in the interim before implementation, that firms are preparing themselves adequately to meet the requirements. “To get a view on the progress of deposit takers towards meeting the 31 December 2010 deadline for implementing SCV systems, we proposed requiring deposit takers to submit a pre-implementation report. This report has to be submitted by 31 July 2010 for the period up to and including 30 June 2010 and must include: a statement on whether a deposit taker had a plan for implementing the SCV requirements; how this was progressing; whether senior management believed implementation would be completed by 31 December 2010; and any issues that may affect the deposit taker’s ability to implement by the deadline,” says the FSA paper.
This regulation change, much like the incoming liquidity risk regime, again highlights the importance of a consolidated approach to data management. It should also prove to be yet more compulsion for firms to invest in their data architectures to both meet compliance requirements and to gain competitive advantage over their rivals.