FCA looks to technology for smarter regulatory reporting

UK regulator seeking feedback on its use of technology for regulatory reporting at TechSprint event.

The Financial Conduct Authority (FCA) is seeking input from the industry on how technology can potentially help firms meet reporting requirements and improve the overall quality of the data submitted. 

The UK’s financial regulator has tested the use of technology to map reporting requirements directly to data firms hold in a bid to ease the regulatory burden.

The test was carried out during a two-week ‘TechSprint’ hosted by the FCA and the Bank of England, with participants including HSBC, Credit Suisse, Lombard Risk and Santander. A proof-of-concept was developed that allowed reporting rules to be machine-readable and executable.

“Firms could map the reporting requirements directly to the data that they hold, creating the potential for automated, straight-through processing of regulatory returns,” the FCA said. 

Changes to requirements around reporting and the quality of data submitted have proved to be problematic for the industry since the introduction of MiFID II on 3 January.

Just one week into the new regime, EU authorities were forced to delay the implementation of dark trading rules until March, citing insufficient and incomplete data reported by trading venues.

Similarly, investment firms were handed a much-desired six-month grace period from MiFID II’s legal entity identifier (LEI) reporting rules, after regulators became aware that not all firms would be able to meet the requirements.

The UK’s financial authority has tested the use of technology to map reporting requirements directly to data firms hold in a bid to ease the regulatory burden.

Trade and transaction reporting under MiFID II has been subject of debate since the rules were first laid out, with market participants expressing fears over inaccurate reporting and the consequences related to reporting failures.

Tech potential

Commenting on the decision to implement more technology for reporting, Guy Kirkwood, chief evangelist at robotics expert UiPath, explained robotic process automation (RPA) has already had a huge impact in the way financial institutions meet regulatory requirements, and could have an even greater impact in the future.

“These organisations have large teams dedicated to complying with a raft of regulations, much of which involves analysing large amount of data from various business lines and systems,” Kirkwood said.  

“The growth of robotics is helping to automate manual tasks and provide higher levels of accuracy and enhanced productivity. The future development of intelligent RPA may be able to further replicate human decision-making and further disrupt financial compliance.”

The FCA added the TechSprint had demonstrated that machine executable reporting was possible and has the potential to improve current issues with the reporting regime.

“The TechSprint has proven that technologies exist and can be effectively combined to make machine-readable and machine executable regulatory reporting a reality,” the FCA said.

“We believe that introducing this technology to our regulatory reporting process could provide significant benefits for regulators and firms.”

The call for input asks for views on the broader issues of using the technology for reporting, including potential legal or unintended consequences, regulatory barriers and various costs associated with reporting compliance.

It is due to close on 20 June, and the FCA said it plans to publish a feedback statement in the third quarter this year.

Earlier this week the FCA also announced an agreement with the US Commodity Futures and Trading Commission to support technology start-ups through collaborative work on the FCA’s Innovate and the CFTC’s LabCFTC FinTech initiatives.