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UK FSA Sends Out “Dear Compliance Officer” Letter for SCV Reforms, Data Testing on its Way

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In line with its recent more aggressive approach to ensuring the market complies with its demands, the UK Financial Services Authority (FSA) has this month sent out a letter to compliance officers about the upcoming single customer view (SCV) reforms. According to the regulator, the letter is aimed at providing more information about the new requirements, which are all part of the Financial Services Compensation Scheme (FSCS), and invites firms to take part in a verification pilot programme for the reports in the “near future”.

Much the same as the testing work going on around liquidity risk reporting to the FSA’s Gabriel system, the FSA seems keen to launch a pilot programme to allow firms to adapt their systems correctly in order to produce their SCV reports within the mandatory deadline of 72 hours after receiving a request. The reforms will mean firms will need to add at least 25 new data fields to be able to provide an aggregate view of all customer deposits across businesses and products. The regulator is looking for 20 willing firms to participate in its pilot programme, which it is hoping to kick off in the autumn of this year.

This new requirement is part of the reforms introduced with the Banking Act 2009, and follows two FSA policy statements confirming amendments to the FSA Compensation Handbook that the regulator indicates are designed to facilitate “faster payout” of compensation in the event that a deposit taker is unable to meet the claims of depositors. All deposit takers are required to be able to prepare the SCV, but those with less than 5,000 accounts held by eligible claimants need not have an electronic SCV, although they will still need to be able to provide the SCV on request, in another format.

Firms need to be able to produce a pre-implementation report, which details their plans to adapt their systems in accordance with the requirements, by 31 July this year and a pilot programme would assist in this endeavour, according to the FSA’s logic. The report includes a statement about how the deposit taker proposes to transfer to the FSCS a single customer view for each eligible claimant, including the transfer method and format of the SCV file. It will also need to include confirmation of the dates the deposit taker started implementation and plans to end implementation and whether the implementation is on time.

By 31 January 2011, a sample SCV file will need to be submitted to the FSCS for verification, together with implementation and SCV reports to be sent to the FSA. FSCS will then check and confirm whether the SCV files are capable of being submitted to the FSCS and are compatible with the regulator’s systems. SCV files are to be submitted by 31 January 2011, and FSCS has until 31 July 2011 to complete the verification sign off process.

FSCS has appointed Experian as its verification solution provider and the FSA indicates that it is currently defining the report verification process with the data and analytics solution provider. It is paying particular attention to the secure transmission , processing and destruction of sample SCV files, says the regulator, likely to reassure firms that it is taking data security seriously.

In addition to the data required by the 31 July deadline, the FSA is asking firms on a voluntary basis to submit a number of data items to Experian in order to “assist in the planning for the verification exercise”. To this end, the regulator is asking for basic registration details to support the verification process including: key contact details for each deposit taker; each deposit taker’s preferred transmission method for submitting the SCV file; intended SCV file format; and any additional details regarding the format and structure of their SCV files that deposit takers are willing to share at this stage.

Given the number of data challenges facing firms that are under the FSA’s SCV cosh, any opportunity to receive guidance is likely to be welcome.

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