Across Europe and beyond, financial services (FS) firms are faced with a multitude of regulations that they need to comply with. But achieving compliance can prove a complex, costly and time-consuming activity for firms.
With this in mind, industry participants and the UK regulator, the Financial Conduct Authority (FCA), are considering how to develop and adopt regulatory technologies (RegTech) to help them meet and simplify regulatory compliance requirements. Over the past 12 months, we’ve seen an increased appetite among firms, regulators and technology providers to consider the development and use of RegTech solutions.
The FCA leads the way among global regulators in promoting innovation and competition throughout the FS sector. This is exemplified by world-leading initiatives such as Project Innovate, regulatory sandbox and dedicated robo-advice unit. Advancing RegTech is a natural extension of this commitment to innovation and the regulator is already engaging with industry participants through a range of activities.
RegTech benefits at a glance
1. Supporting innovation
RegTech will play a vital role in the FCA’s mandate to promote innovation, through the identification of technologies that help firms better manage regulatory requirements. In addition, RegTech will help the regulator to fulfil its primary objectives of protecting consumers, confirming market integrity and promoting effective competition.
2. Analytics and insights
Innovative technologies will support firms in their development of advanced data analytics capabilities (including scenario analytics and trend and horizon scanning), which the regulator considers to be important tools for improving the quality of information and insights.
3. Reduce the cost of compliance
The cost of compliance in financial services has risen sharply over recent years; however, a recent EY survey revealed that 85% of the respondents consider that further opportunities exist to improve the linkage between risk and business performance.
The case for adopting RegTech is compelling. Using the technology to identify risks, analyze data, generate reporting and remediate issues will not only help FS firms ensure compliance with regulation – it can also have a positive impact on their business performance.