12-02-2018
Regulatory reporting’ is the submission of raw or summary data needed by regulators to evaluate a bank’s operations and its overall health, thereby determining the status of compliance with applicable regulatory provisions. Governments across the world give prime importance to keep their banking systems updated. This has proved to be an important task, more so after the financial crisis of 2008-09 or what we have come to know as the “Great Recession”.
After the said financial crisis, several governing bodies especially in the United States started evolving a regulatory environment of sorts. Many new reforms were introduced most notably the Dodd–Frank Wall Street Reform and Consumer Protection Act by the United States Congress and Basel I, II and III namely by the Basel Committee on Banking Supervision (BCBS). It proposed to make changes in the American financial regulatory environment that affected all federal financial regulatory agencies and almost every part of the nation’s financial services industry. Nowadays, banks and financial institutions are required to develop dynamic systems so as to keep themselves regulated according to these reforms. This can be owed to the increased requirement of information reporting, audits, calculations etc. A solution that automates and streamlines the process to generate reports in a timely fashion is the need of the hour.
But this is easier said than done. Regulatory requirements differ across the globe. Some governments follow an approach where the whole banking spectrum is under their control, thus limiting the entry of new players in the market. On the other hand, some governments do not directly control banks but put such restrictions in place which compel them to disclose accurate information at a timely interval in order to keep a check on them. Whatever the case, regulatory reporting is a vital cog in the banking business and is here to stay. So what makes it all so important? Basically, regulators want all the smoke screens removed between them and their entities when it comes to matters like liquidity management, asset liability management, foreign exchange exposure, risk management and the entity’s financial health. Once data is collected this way, there’s a much lower chance of the reporting bank going bankrupt as there still is time to ensure that corrective measures are in place and the bank’s profitability is not threatened. It can be compared to a type of early warning system specially crafted for banking organizations.