Model driven machine executable regulatory reporting TechSprint

Held alongside the Bank of England and facilitated by Grant Thornton, the event explored the potential for model driven, machine readable and executable regulation.

In November 2017, Hitachi hosted our fourth TechSprint. Participants at the TechSprint comprised attendees from last year’s Unlocking Regulatory Reporting TechSprint, as well as stakeholders who have presented ideas to us in the course of our engagement programme throughout the year.

Regulatory reporting can be a challenging subject for financial institutions. It is crucial to maintain a safe and transparent financial services system that protects consumers and promotes healthy competition. However, regulatory reporting can be resource intensive.

This TechSprint successfully proved that we are able to take a regulatory requirement contained in the FCA Handbook and turn it into a language that machines can understand. Using that language, machines can then execute a regulatory requirement, effectively pulling the required information directly from the firm.

For regulators and firms, this means they can be certain that the information that they are asking for and providing is the exact information that is required. The TechSprint also proved the potential flexibility of this approach by simulating a rule change in the Handbook in real time and seeing this automatically executed by the firm.

Although the possibility of machine readable and machine executable regulatory reporting was proven using only a small subset of reporting rules within both the FCA and PRA handbook, the concept could in theory be expanded to all regulatory reporting requirements.

The benefits of a more efficient regulatory reporting system are clear for both regulators and firms. Beyond a reduction in costs, removing ambiguity – but not judgement – on the firm side would in turn allow for more accurate and uniform industry reporting and faster risk identification by regulators, creating the potential for real time sampling of the industry. Machine readable and executable regulatory reporting would mean changes to regulatory requirements could also be implemented more quickly. 

We will build on this work in the coming months with our findings being progressively shared to assess both the potential of this and how it can be implemented across the UK financial services sector.

Following their participation at the TechSprint, Immuta and the Information Society Project at Yale Law School have published a white paper on model driven machine executable regulatory reporting. This paper was informed by these organisations’ participation at the Model Driven Machine Executable Regulatory Reporting TechSprint. This paper should not be taken to represent the official views of the Financial Conduct Authority or the Bank of England, nor read as any indication of future policy direction.

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