We are exploring how technology could make it easier for firms to meet their regulatory reporting requirements and improve the quality of information they provide.
One of the key areas of technology we are focusing on is possible solutions to the increasing challenges financial institutions face in complying with their regulatory reporting obligations.
Together with the Bank of England, we are exploring how we can use technology to link regulation, compliance procedures, and firms’ policies and standards together with firms’ transactional applications and databases.
If successful, this opens up the possibility of a model driven and machine readable regulatory environment that could transform and fundamentally change how the financial services industry understands, interprets and then reports regulatory information. We call this project ‘Digital Regulatory Reporting’ (DRR).
Work to date
November 2017: FCA & Bank of England joint TechSprint
In November 2017, the FCA and the Bank of England held a two-week TechSprint to examine how technology can make the current system of regulatory reporting more accurate, efficient and consistent.
At the TechSprint, participants successfully developed a ‘proof of concept’ which could make regulatory reporting requirements machine readable and executable.
This means that firms would be able to map their regulatory requirements directly to the data that they hold, creating the potential for automated, straight-through-processing of regulatory returns.
This would benefit both firms and regulators. For example, the accuracy of data submissions could be improved and their costs reduced, changes to regulatory requirements could be implemented more quickly, and a reduction in compliance costs could lower barriers to entry and promote competition.
In February we published a Call for Input outlining the technical steps that developed this proof of concept and asking for views on how we can improve this process. In October we published a Feedback Statement that summarised the responses we received to the Call for Input and outlined our next steps.
Pilot Phase I (June 2018 – December 2018)
In addition to publishing the Call for Input, we worked with the Bank of England and various organisations (listed below) on a 6 month pilot to build upon the proof of concept developed in 2017. The purpose of the pilot was to evaluate the feasibility of scaling the work from the TechSprint. The pilot considered two use cases, UK domestic mortgage reporting and calculation of the Common Equity Tier 1 (CET1) ratio.
Transparency is an integral part of the pilot and we welcome and encourage input from across the industry. We have published the report of the first phase of the pilot that provides an overview of the work and findings so far. If you are interested in discussing the technical aspects of this paper in more detail, please contact us at [email protected].
During phase I, the DRR team ran two industry open days to share the output with the industry. These will continue throughout further phases of work, in conjunction with regular web updates and publications.
We welcome feedback, requests for further information and expressions of interest in becoming involved in the pilot. Please email [email protected].
Pilot Phase I participants:
- Credit Suisse
- Lloyds Banking Group
Pilot Phase II (February 2019 – present)
This phase of work will focus on addressing some of the gaps identified in phase I, in particular understanding the economic viability of DRR and exploring how it could apply to different product groups.
- Assess economic viability of DRR from a participant organisation, industry and economy-wide perspective
- Explore possible third party solutions for the generation of machine executable regulation and the definition of data and how they may fit into DRR vision
- Further develop and test processes for definition of data and creation of machine executable regulation developed in phase 1
- Understand what regulatory reporting processes and reports could be implemented using a DRR solution, including:
a. which regulation is suitable for the creation of machine executable regulation
b. what data could be included in the standardised interface between firm and DRR system
2. Understand the extensibility and relationship of data models defined for different domains
3. Understand challenges and possible paths for implementation and adoption of DRR vision
Pilot phase II participants:
- Financial Conduct Authority
- Bank of England
- Credit Suisse
- Lloyds Banking Group