Regulation: drawing opportunity from necessity
The past few years have seen a raft of legislation, such as PSD2 and GDPR, that directly affects the banking industry. A significant proportion of this regulation includes regulatory requirements specific to data, with one example being the BCBS 239 standard within Basel IV, which requires banks to meet specific standards relating to risk data aggregation. However, despite the deadline of January 2019, progress has been slow – a point that has not been lost on regulators. The ECB’s May 2018 Thematic Review made clear its displeasure1, while the BIS has encouraged national supervisors to apply more stringent measures, such as capital add-ons and restrictions on business activities, to banks that fail to comply2.
Compliance with this (and other) data-related regulation is clearly not optional. However, if undertaken in the right way, it is also possible to derive major business benefits at the same time. This applies across the banking enterprise in general, but is particularly relevant in FX businesses, where extreme cost pressure is now the norm and profitability is depressed – both of which are driving a need for automation.
The critical point is how data is managed and stored. An ideal implementation is one where diverse data classes and formats become completely clean, consistent, normalised and enriched. In addition, this capability has to be channel-agnostic and apply (among others) across electronic, voice, direct, prime broking, retail and corporate activities.
Apart from achieving regulatory compliance, this opens the door to converting clean big data into smart data: in this case, smaller information subsets that are both valuable and actionable. This data will then be accessible from multiple perspectives, such as individual client activity by pair, by channel, by request, by deal, by instrument, by hit rate and so on.