COMPLIANCE IN EUROPE – A TIP FROM AMERICA

Europe’s banks should study the self-service data assurance technique being adopted by several US banks. It helps compliance teams work better and faster says Jon Asprey, vice president of strategic consulting at Trillium Software.

Jon Asprey Trillium Software

Jon Asprey Trillium Software

Financial institutions are being swamped with compliance demands. IDC predicts that financial services IT spending pertaining to risk functions will reach more than $80 billion by 2017. The data management aspects alone can run into tens of thousands of man-hours per institution, each year. Firms are having to adapt and find new techniques to manage the increasing burden.

Self-service data
European banks should be watching the innovative self-service data assurance approach their US colleagues are taking to the Dodd-Frank Comprehensive Capital Analysis and Review (CCAR). This regulation requires regular data submissions and the provision of detailed reports (at individual loan-level) to the Federal Reserve Board (FRB) for economic stress testing. Meeting the requirements demands that banks vastly increase their focus on data management. The CCAR submission process requires a great many data elements to be reported to the FRB in a strict format defined by the regulator. Any deviations from the specified format or any gaps must be documented and explained by the bank as part of the submission process. To satisfy the increase in regulatory scrutiny, banks have had to empower business users in Risk and Finance to better understand their data. The solution several have adopted is to provide these teams with “self-service” data assurance capabilities.

While traditional compliance approaches required risk teams to rely heavily on expertise from IT and operations for data management, a number of US banks have been able to significantly reduce this reliance, improving team effectiveness and increasing speed to delivery. Self-service data assurance, supported by business friendly data analysis tools, is empowering CCAR compliance teams to access, validate, analyse and monitor compliance and risk data themselves, without extended reliance on technical resources. As well as speeding up work and reducing costs, self-service is enabling compliance teams to be more dynamic; able to cope with frequent changes to data rules prescribed by the FRB and also to better cope with demands for high frequency reporting (monthly). A further benefit is that data transparency is improved, resulting in more satisfied regulatory authorities.

Clear benefits
According to one US institution, the introduction of self-service capabilities has been as transformative to data assurance at the firm as the introduction of Microsoft Word was to word processing. Self-service is delivering significant manpower cost savings and minimising the upheaval that new compliance demands place upon the bank.

An executive from the institution told me that at his firm, data rules (of which there are thousands under CCAR) can be processed and applied at least ten times faster than before. Giving an example, he said that rule modifications from the FRB can now be applied in minutes as opposed to the previous turnaround time of days or weeks.

Time for change
In Europe, teams faced with the data management demands of a raft of regulatory requirements could benefit from leveraging a self-service approach. With FATCA and related inter-governmental agreements (IGAs) adding to the data assurance and reporting burden, pressure on compliance teams is high. In just the last few weeks, IGAs for tax information exchange with the UK have been entered into by Gibraltar, Bermuda, the Isle of Man, Jersey and Guernsey. The Bank of England too could soon add to the strain, having outlined a framework for stress tests of the UK banking system which could mirror aspects of the US CCAR regime.

It is clear that adopting a self-service approach can transform compliance operations by connecting business users directly with their data. Those banks that are still relying on complex IT infrastructures to provide access to data and insight could win great advantage by understanding how some leading US institutions are empowering risk and finance teams to deliver against the particularly detailed demands of CCAR. Not only might insight into self-service tools and techniques better enable Europe’s banks deliver against current regulatory requirements, it may also help ensure they are prepared in the event of more detailed scrutiny in the future.

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Jon Asprey
Vice President, Strategic Consulting
Harte-Hanks Trillium Software

Jon leads the advisory consulting practice at Trillium Software where he is responsible for the delivery of best practice advice and guidance to Trillium’s many international clients. He has over 15 years’ experience in information management, data quality management, data governance and data analysis, gained through working for both global consultancies and software vendors across a variety of international financial services clients.

During the course of his work, Jon has advised senior business officers at a number of global financial services firms in support of Governance, Risk & Compliance (GRC) initiatives within credit risk and regulatory compliance engagements linked to FATCA, Dodd-Frank, Basel II, Solvency II, customer deposit guarantee (FSCS) and credit risk data assurance.

Prior to his role at Trillium, Jon has also held senior consulting positions at both HP Consulting and Deloitte LLP where he was the data quality lead within the Enterprise Risk practice.

Reach Jon via www.trilliumsoftware.com, see Jon’s Trillium Software blog or follow Trillium Software on Twitter.

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