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Increasing pace and complexity of global regulatory requirements means financial firms must improve data management strategies to remain compliant

LONDON, UK – 8 April – Financial regulation experts, JWG, today released a global report commissioned by MarkLogic Corporation, the next generation data platform provider for simplifying data integration, indicating that the pace of global financial regulatory change continues to increase.

The report, Ready for Digital Regulation?, underscores the need for firms to increase their data integration capabilities in order to keep up with regulatory change, control growing compliance costs, and avoid penalties. The research, springing from in-depth interviews with senior executives from 12 tier-1 global financial institutions, indicates that:

  • There may be as many as 374 ‘legislative initiatives’ targeted at financial services firms by 2021.
  • Regulation is now industry wide. Of the 374 legislative initiatives, over 90% will be applicable to both buy and sell-side firms. The expectation is that these regulations will have a greater impact on the buy-side, which has traditionally delegated much of regulatory compliance to the sell-side and is therefore less well equipped in technological resources and know-how to deal with that volume of regulation.
  • This volume of regulation, coupled with growing demands from regulators, such as ad hocrequests for the complete audit trail of financial transactions, means that firms are under pressure to implement the right data management strategy to remain compliant.

Industry executives told JWG that the pace, volume and complexity of new regulations will significantly challenge their firms’ ability to maintain compliance and avoid potentially enormous fines. The issue demands both increased manpower and the right technological capability to ensure firms can provide any data requested by regulators in a timely manner.

“Senior executives at large financial institutions are under substantial pressure to meet rapidly evolving regulatory requirements with project-based, manual approaches which create serious data headaches for compliance. Digital regulation offers an exciting alternative. In the future, firms will be able to update rulebooks just like a smartphone today and the refreshed software will mitigate new risks,” said PJ Di Giammarino, CEO, JWG.

JWG’s prediction is for even more legislation beyond 2021 as change becomes the new normal, given new updates on the FAST Act in the U.S., Brexit looming in Europe and from MiFID II revisions, which was only implemented in 2018. In the second half of 2018, JWG found over 2,150 documents in the regulatory pipeline, which were predominantly from Europe (33%) and North America (33%).

The regulatory landscape requires action now on the part of firms to integrate their data in such a way as to achieve a strategic, 360-degree view of it.

“Data lies at the heart of any organisation’s future strategy and is vital in how financial organisations respond to current and future regulatory challenges,” said Dr. Giles Nelson, CTO Financial Services, MarkLogic. “It is also fundamental to utilising new and innovative technologies such as AI, machine learning, natural language processing and distributed ledgers. To meet these requirements, there is little choice but for firms to take a strategic and digital approach across functions and avoid the building of new application and data silos to tactically cope with the latest deadline or new technology.”

Francis Gross, Senior Adviser, Directorate General Statistics, European Central Bank, added: “This paper shows that firms looking at their own individual strategy and lone regulators writing their own specific rules won’t achieve sustainability in the digital age. We need an ambitious, public-private, global masterplan that will also help guide immediate collective action towards that sustainable digital future. One feasible initial step with transformational power could be to adopt the very simple global data infrastructure that has been largely sitting idle, the Global LEI System.”

For the full findings from the report, click here

Notes to Editors

In conducting this research JWG used a quantitative research method to evaluate the global regulatory pipeline between now and 2021. Drawing upon RegDelta, its next generation regulatory data platform and its detailed experience of global regulatory publications, JWG analysed over 100 different regulatory bodies to conduct this analysis. This analysis comprised of studying regulators’ workplans, newsletters and briefings to understand their plans and priorities.

About JWG

We are operations and technology professionals, trusted by the global financial services industry as experts in regulatory change management. We pride ourselves on capturing every financial services regulation published the world over and are the only organisation to set ourselves this global challenge.

For the past decade, our team of independent analysts has helped the industry interpret large quantities of regulatory reform and action it in a smart and intelligent way. JWG work with trade bodies and regulators to facilitate the understanding of regulatory change and its impact on financial institutions, both sell and buy-side, market infrastructure and the vendors that serve them all. Facing the ever-pressing challenge of understanding, enacting, complying with and facilitating regulation, respectively, JWG play a crucial role, bringing together a wide variety of stakeholders and pooling their knowledge and understanding to provide invaluable insight, context and feedback.

We do this in three ways. Firstly, we track the totality of the FS reform across the globe in order to educate the market via our publications and events. In parallel, we run collaborative special interest groups to crowdsource the impact from legal, compliance and operational perspectives. Finally, we offer the world’s first regulatory change management platform, RegDelta.