Banks have added huge staff numbers to cope with regulation and compliance. Consultants and regtech may eventually put this trend into reverse, writes Brian Caplen.

Regulators are crazy for data. The more they have the more they feel sure they are properly scrutinising the banks and cannot be blamed if something goes wrong.

In reality, the issue is having the right data, rather than lots of data that is difficult to fathom. Even then, there is only any worth in having data if someone is empowered to make a critical judgement call that prevents a bank or banking system from getting into trouble.

No matter. The regulations (think MiFID II) and the regulators insist on data so banks must supply numerous fields of it. Among the challenges for banks is that the required data is spread around the institution, it is in different formats and there is no common reporting platform. A huge number of unproductive hours are wasted gathering it all up and processing it.

Wouldn’t it be nice to give the job to someone else? Currently robotics is not at a stage where it can fully take on the task and in any case the regulators would need to be comfortable with this approach.

But consultants are starting to offer Reporting as a Service or Raas. In fact, faced with slower revenue growth from regulation in the US – which accounts for 12% of the $36bn in global financial consulting revenues, as a result of a more relaxed approach by the Trump administration – Raas could provide ​them ​with an opportunity.

A report by the research firm Source Global Research says: “If Raas were to take off, this could be particularly good news for the Big Four, which have the risk and regulatory credentials needed here and are generally well respected by regulators.”

Smart consultants are working with regtech firms and the regulators to provide end-to-end solutions and at some stage artificial intelligence and robotics could transform the approach.

Smart banks are seizing the opportunity to combine risk and compliance with digital and business transformation so that the data they supply to the regulator can also be used for risk management and customer interaction. If they are successful in this, the business gains to the bank could be far ​greater than the gains to the regulator in monitoring the banks. 

Brian Caplen is the editor of The BankerFollow him on Twitter @BrianCaplen

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