What does the regulatory revolution on data collection mean for firms?

22 January 2020

We are going through a revolution in the way financial services firms use data. The quantity and complexity of the data available to firms is unprecedented. This brings unique opportunities to better tailor the services provided to customers but also significant regulatory, operational and even ethical challenges.

In a PwC At a glance publication, we recently discussed a Bank of England discussion paper addressing the way it collects data from financial institutions. We also looked at a data strategy from the FCA. These show UK regulators recognise data challenges and opportunities apply to them just as much as to the firms they supervise.

The Bank of England (BoE) paper sets out a vision to transform the reporting relationship between the BoE and regulated firms over the next five to ten years and would represent a radical departure from current practice. For example, one of the options explored was the introduction of a framework to allow the BoE to automatically extract data from firms on-demand through Application Programming Interfaces (APIs).

At the moment, regulatory reporting focuses on firms submitting data to the regulators. This gives firms time to source data and take it through their internal checks, governance and sign off processes to ensure completeness and accuracy before submitting (a process the BoE is clear would remain for reporting such as for capital calculations).

Regulators gaining direct access to other data on-demand through APIs could make the regulatory reporting process more efficient and less expensive. But it would also create the challenge of ensuring data accuracy at all times.

As the BoE is reconsidering its approach to data collection, the FCA is also expected to automate supervisory processes where possible. The regulator has updated its data strategy, signalling an increased focus on how it can make better use of techniques such as data analytics to detect and prevent harm, misconduct and financial crime.

Clearly both regulators are exploring how regulatory technology (RegTech) and supervisory technology (SupTech) can be better deployed to improve data collection and analysis, as well as to reduce the burden of regulatory compliance. This is reflected in their commitment to machine readable and executable rules, something which would require firms to replace legacy manual processes with automated technologies to minimise the need for human judgement and manual intervention.

Our experience supporting firms in using technology tools shows firms that don’t embark on that journey may lag behind their peers and miss out on potential benefits from gains in efficiency.

The publication of the BoE’s paper, as well as the FCA’s updated data strategy, represent the start of a process to overhaul the way regulators collect data from firms. At this stage it’s unclear how policy will develop, but what is certain is the regulators are committed to making the process more efficient and technologically-enabled.

This is to be welcomed, and the sector needs to play its role in helping the BoE achieve these shared objectives.

Leigh  Bates

Leigh Bates | UK FS Data Analytics Leader, PwC United Kingdom
Profile | Email | +44 (0)7711 562 381

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