As noted by Reference Data Review recently), the UK Financial Services Authority’s (FSA) incoming Single Customer View (SCV) reforms, which are part of the Financial Services Compensation Scheme (FSCS), will require a significant amount of effort to create new data linkages in order for the institutions covered by the regulation to be ready to report their consolidated customer data. However, there is still a fair amount of confusion in the market around exactly who the legislation will apply to. The FSA has in fact specified that it will be expecting all “deposit taking” institutions, which should cover the majority of the UK financial services community, to comply by the fourth quarter of this year.
The single view is required for firms to be enabled to achieve a seven day payout target for customer compensation, should the worst happen, according to the FSA. In order to ensure that firms are capable of doing this, the regulator is therefore introducing reporting procedures to test firms’ SCV capabilities. 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.
These 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. 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.
The boards of these firms will also need to indicate whether the implementation will be completed by the 31 December 2010 deadline, and if not why not. Similar to the FSA’s liquidity risk regime, the SCV therefore asks for a certain level of accountability. ‘Dear CEO’ letters are seemingly now de rigueur for the regulator, as it seeks to instil a greater degree of risk and data responsibility within financial institutions’ senior management.
The next report required by the regulator after this will be on 31 January 2011, when firms need to confirm that they have completed all the work required to produce SCV reports, including signed confirmations by the board, again. The full list of requirements and deadlines are available to download at the bottom of the page.
The costs of implementation will also be high: according to the estimates published by the FSA and drawn up by consulting firm Ernst & Young last year, the total cost to a large bank of the data cleansing process in order to be able to produce these reports will be between £191 and £243 million. The lack of a common plan and data standards may mean even more cost to those banks operating across multiple jurisdictions.
In order to find out more about the industry’s state of readiness for the SCV reforms, think tank JWG is conducting an anonymous survey on the subject. According to PJ Di Giammarino, CEO of JWG, many firms believe the SCV will not apply to them but will likely get caught out for this way of thinking when December rolls around.
The objective of the survey is to pinpoint the key issues that the loosely coordinated drive from regulators in Australia, the EU and elsewhere has created, he says. “We will use the results to define the industry’s priority standards efforts in the customer compensation space,” he adds. The survey can be accessed here.