Regulation & Standards special report

November 2014 -- Sponsored by SIX Financial Information

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The Seeds of a Turnaround

In the Q&A with Dilip Krishna, a director at Deloitte, in this special report on Regulation & Standards, the regulatory expert portrays the financial industry's efforts on regulatory compliance as "uneven." As a result, Krishna says, data management could have been improved if it weren't for a typical "tactical" approach to addressing each piece of regulation as it comes up.

In the Virtual Roundtable in this report, however, HSBC's Chris Johnson does see some progress happening when it comes to efforts to upgrade data management processes, especially those spurred by regulatory compliance needs. Asset data usage and accountability is being extended directly to asset owners, who must answer to regulators evaluating their data content. The bar for data quality is rising, in terms of completeness, accuracy and transparency, Johnson says.

Nonetheless, even with these driving forces, the industry still must devote more resources to address their demands, as SIX Financial Information's Jacob Gertel observes. Before even decided what resources should be designated, multi-national corporations have to figure out the differences in requirements from country to country, for rules such as Basel III and Solvency II. Readiness is depending on local regulations and the ability to get compliance in each market.

AIFMD, the Alternative Investment Fund Managers Directive, is adding to the complications, partly by generating more classification data to indicate geography, asset type, issuer, ratings and legal entity identifier (LEI), according to Johnson. Although AIFMD is similar to Solvency II and US Form PF requirements, European markets may have specific and different corollary rules based on AIFMD for their market participants to follow.

All is not lost, despite the apparent weight of tasks resulting from these regulations, as Johnson says that the required new data content, and its quality and governance, is driving increased complexity, and bringing necessary attention to how firms can manage data that has grown organically but without consistent standards. Since the data fabric is entwined deeply in the infrastructure, long-term investment is required and will deliver "lasting improvements," he says. Providers and institutions, Gertel adds, must build systems so new requirements can be introduced more easily.

These insights, as a whole, point to the possibility that regulations have caught the attention of data managers at major global financial institutions enough to get them thinking about taking actions to make compliance easier. It's carrying out such actions that remains a challenge.

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