Our financial system is much more secure today than before the financial crisis, but the associated regulatory costs for banks are enormous. Low interest rate environment, digitalization, new competitors and the current economic crisis triggered by the coronavirus pandemic are putting massive pressure on the financial services industry.
Supervisors in Europe have taken measures in response to the crisis to somewhat ease the regulatory pressure on financial institutions in the short term, for example by postponing stress tests and Basel III finalisation, as well as new simplified regulations such as the Investment Firms Directive (IFD). However, as the countries pursue to obtain better and more timely data to mitigate their risks, we can expect that the current crisis will accelerate the shift towards more data granularity and near-to-real-time reporting. Thus, in the mid-term the regulatory pressure on financial institution will increase. The banks must therefore think about new models of cooperation. Standardisation, industrialisation and automation are logical ways of exploiting economies of scale across borders.
Furthermore, the Covid-19 pandemic has made Business Continuity Management (BCM) a priority. Corresponding requirements by supervisory authorities have already been in place for years, for example Guidelines on ICT and Security Risk Management by the European Banking Authority (EBA) or Technology Risk Management Guidelines by the Monetary Authority of Singapore (MAS).
In this context, more and more institutions are taking the step of outsourcing important processes that are not part of a bank's core business, such as regulatory reporting. Outsourcing in the form of application management and operation as managed services or complete business process outsourcing can reduce IT operating costs and relieve the burden on personnel capacities.
The Key Take-Aways
What measures in the area of regulatory reporting did supervisory authorities take in reaction to the current crisis triggered by COVID-19 pandemic?
Business Continuity Management in Regulatory Reporting
Managed services in regulatory reporting and BCM: Challenges and opportunities
How can IT outsourcing setup look like?
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