Data quality, consistency, reconciliation and lineage is now top of mind for both regulators and the financial services firms they oversee. That’s according to subject matter experts at Wolters Kluwer’s Finance, Risk & Reporting business who are predicting an increased focus on data structure and management for 2018. Whereas regulatory requirements were previously centered on firms submitting static reports at a specific time, in the correct format, there is now set to be an increased appetite for more detailed and granular data to gain deeper insight.

“Financial services firms have been building solutions to address the onslaught of regulatory requirements that have been enforced on them over the years. These are often comprised of numerous technologies, inflexible technology support, overlapping but variant functionality and discrete independent data models that create a tactical legacy that is costly and inefficient to maintain,” notes Rajat Somany, Global Head of Strategy, Product and Platform Management for Wolters Kluwer’s Finance, Risk & Reporting business. “This has been a problem which firms have had to find workarounds for but those approaches are becoming increasingly insufficient due to a gradual but significant step change in regulators’ mind-sets. Banks would now be well advised to implement systems that allow them to satisfy regulatory demands that are increasingly focused on obtaining meaningful data assurance as opposed to receiving static reports.”

Regulatory drivers contributing to this trend include the Basel Committee on Banking Supervision's Standard Number 239 (BCBS 239). The objective of BCBS 239 is to induce banks to improve the way they define, gather and process risk data to enhance their ability to manage their risk positions within their risk appetite. Adherence to the principles will result in wide-ranging changes to the way banks manage risk and hence their business. In many cases modernization of data management and internal control procedures is required.

AnaCredit (Analytical Credit Datasets), meanwhile, requires firms across the Eurozone (plus some other countries on a voluntary basis) to deliver granular credit and counterparty information. It introduces a significant change in the amount of data that is required to be reported, and on such a frequent basis — daily in some cases. All affected firms will be expected to have up-to-date expertise around data requirements and local discretions, as well as processes in place to monitor further stages that could affect both their single and multi-country operations in the future, Wolters Kluwer’s experts note.

“The demands of International Financial Reporting Standard (IFRS) 9 and the Current Expected Credit Loss (CECL) standard also contribute to the need to up the focus on data management. The shift in the treatment of impairments from an incurred-loss model to one that involves measuring expected credit losses, will mean substantial adjustments to data management systems,” adds Jeroen Van Doorsselaere, Vice President Product Management, Global Finance & Risk for Wolters Kluwer’s Finance, Risk & Reporting business. “Principles and procedures for classifying assets in terms of credit quality and calculating losses likely to accrue from them will have to be developed. Once in place, the procedures will have to be applied to every asset on the balance sheet. Finance, Risk and Reporting will become truly integrated as the start date for the new CECL standard approaches and we see the implementation of IFRS 9. A truly integrated process ultimately provides the best foundation for a bank’s Management Information System.”