Banks preparing overhaul of technology infrastructure to meet enhanced regulatory obligations
Australia’s Authorised Deposit-Taking Institutions (ADIs) are being asked to provide their regulator with more granular data at a higher quality than ever before. And, according to a new survey from Wolters Kluwer’s Finance, Risk & Reporting business, a vast majority (82%) will either change their current approach or are considering more strategic alternatives for complying with new regulatory reporting demands. As a result ADIs will be well advised to verify the abilities of their technology infrastructure to meet the significant regulatory challenges ahead.
For the first time in 15 years The Australian Prudential Regulation Authority (APRA) is overhauling its core regulatory reporting requirements, causing a stir within Australia’s financial industry. The modernized framework, otherwise known as the collection of Economic and Financial Statistics (EFS) data, will require ADIs to provide more granular data at a higher quality and ADIs will have approximately one year to comply with the first phase of the plan.
“Compared to other jurisdictions in the Asia-Pacific region, Australia’s reporting requirements were traditionally considered as being relatively straight-forward: the figures to be reported were high-level, the submissions were infrequent and requirement changes were rare,” notes Wouter Delbaere, Market Manager of Regulatory Reporting for APAC at Wolters Kluwer. “It is therefore no surprise that many ADIs were able to get away with a tactical, largely manual approach to regulatory reporting in the past. Firms who are prepared to adapt their technology infrastructure and regulatory reporting approaches now will have first mover advantage in the new regulatory landscape.”
Notably, according to the Wolters Kluwer study completed earlier this month, 75% of more than 30 surveyed ADIs are currently taking such a tactical approach, which is either completely manual or only partially automated – typically via internal Macros – with just 4% of respondents taking a vendor automated approach and 21% an in-house automated approach.
“There is clearly some comfort in sticking to established procedures, and manual spreadsheets are not without advantages; they enable business users, for example, to easily visualize and organize data,” Delbaere says. “But this flexibility is prone to human errors and comes with numerous control risks, a price which many are no longer willing to pay with the EFS changes recently introduced by APRA.”
The ability of ADIs to adopt their regulatory approaches in a cost-effective and compliant manner will depend on the investment in technology infrastructure which collects and automates the production of the required regulatory information, Delbaere notes. “The best-positioned ADIs will be those that upgrade existing infrastructure to collect the additional information required by regulators, while simultaneously consolidating and centralizing this information with other data currently being used for internal and external purposes. A single data repository could then form the basis of all regulatory requirements, including EFS reporting,” he adds.
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