The year 2017 will be marked with uncertainty, as there are various regulatory amendments expected to take place. Globally, ~$80 billion is spent on governance, risk and compliance, and the market is only expected to grow, reaching $120 billion in the next five years. If compliance seems expensive, non-compliance will just knock out the common sense. Financial institutions in the US alone have paid more than $160 billion in fines for non-compliance.
Although the changes in regulation are likely to help banks and financial institutions get some breathing space, they need to be well prepared for new or updated requirements that are likely to be implemented. The potential impact of each regulatory agency's policy can affect the compliance strategy of financial institutions.
Regulatory Challenges of Financial Institutions
Regulatory reporting as a process is here to stay. While the impact of new regulations and changes is yet to be seen, some of the key challenges faced by banks are as follows:
- Multiple sources of data: Banks do not have a single source of information. Depending on the depth of information required, banks need to collate data from different sources to comprehensively meet reporting requirements. At times, this requires the development of IT applications which have an impact on the time and cost aspects of the reporting exercise.
- Multiple & dynamic report formats: Depending on the nature of business, banking systems need to file reports in different formats as specified by the governing regulator. Organizational systems and processes in most cases are not flexible enough to create new or modify existing data models to meet changing requirements.
- Lack of skilled resources: Changing reporting requirements mean that banks not only need finance experts, but also require professionals skilled in mapping business requirements to existing IT systems, developing new applications if and where needed, and s ...
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