Taking the Pulse of Reporting and Capital Adequacy Compliance

Financial services industry market participants are trying to find enough overlap between major new regulations such as MiFID II/MiFIR, BCBS 239 and Solvency II to be able to achieve more with a single data management effort.

This dilemma has emerged during discussions at our European Regulatory Roadshow series, which started recently with Paris and Copenhagen events. The series, hosted by Waters, Inside Market Data and Inside Reference Data, will continue with events in Frankfurt on October 14, Zurich on October 27 and Amsterdam on November 26.

Interactive Data regulatory product executive Hubert Deroubaix told Copenhagen attendees that the lack of overlap is making data management for regulatory compliance a complex and costly proposition.

Although MiFID (Markets in Financial Instruments Directive) II and its associated MiFIR regulation, BCBS 239, Solvency II and the US Foreign Account Tax Compliance Act, which also can figure into the European regulatory mix, all have their distinct provisions and idiosyncrasies, in the end, all of these sets of rules center on two things: reporting and capital adequacy.

BCBS 239 mandates risk data aggregation principles and sets out annual risk data stress tests beginning next year. Similarly, Solvency II, the European Union directive that takes effect on January 1, sets reporting requirements to demonstrate capital adequacy in the insurance segment of the financial services industry. MiFID II/MiFIR are concerned just with reporting overall, without delving into capital adequacy, tax withholding compliance or anything specific about the content of what is being reported and how that may meet desired standards for the financial industry.

It may have been understandable in 2013 or 2014 that data aggregation, governance and processing plans and systems were not in place or up to the demands to come from BCBS 239, as shown in survey results released earlier this year.

But months have passed since those results, and now there are just a few short months before BCBS 239 and Solvency II provisions are going to be the law. It will be interesting to see in the upcoming European Regulatory Roadshow events happening through the end of 2015, whether the industry's pulse—in terms of the functioning of data aggregation governance, architecture and processes for compliance with reporting and capital adequacy rules—has quickened.