Common Reporting and Financial Reporting Cited as Most Challenging Regulations
Common reporting (CoRep) and financial reporting (FinRep) head the list of regulations that financial services find most challenging, according to research from AutoRek.
A survey of senior business executives, conducted by the UK financial data management provider, suggests that organisations are struggling with demands to provide more information on risk exposure and capital data to regulators. One respondent in four admits that the increase in the complexity, granularity, frequency and volume of information required for CoRep and FinRep is a challenge as the European Banking Authority (EBA) seeks to standardise reporting to national regulators.
This is closely followed by 22% of executives who cite Solvency II, the EU legislation requiring businesses to hold enough capital liquidity to cover the level of risk within the business, as their biggest headache. A further 17% of executives name Basel III, the regulation that requires banks to hold enough cash or liquid assets to meet liabilities for a year, as their biggest challenge.
“Regulators are focused on creating a more controlled market and demanding more risk and capital data to increase their visibility into the governance and accountability of organisations,” commented Jim Muir, director of AutoRek.
“As firms start to recognise that the longer term-trend is for providing more data, and faster, investment in new financial controls and strong data management practices is becoming a strategic imperative for the business.”
Currently, those in the insurance and banking sectors are the biggest spenders on financial controls, with 14% of insurers reporting that they currently spend more than £2m per year on the financial controls agenda, and 6% of banking professionals spending more than £5m per year for this purpose.
However, despite the challenges associated with meeting new regulations, the survey suggests investment in financial controls including people, processes and systems is deemed as a ‘help’ in achieving growth with 82% admitting that it enables more rigorous profit and loss control.