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RegTech solutions simplified: Reimagining the banking sector

RegTech solutions simplified: Reimagining the banking sector
March 30, 2017

The financial services industry responded to the 2008 global crisis by tightening regulatory frameworks. However, newly framed policies were expensive to implement and also restricted revenue growth, thereby impacting profitability. Around the same time, RegTech – the use of technology to resolve challenges surrounding compliance policies — emerged.

The term "RegTech" was first coined by UK regulators – specifically the Financial Conduct Authority (FCA) and the Prudential Regulation Authority (PRA). It entered the mainstream business sector following George Osborne's 2015 UK budget with his endorsement of the emerging Fintech sub-sector. It has been noted that "the adoption of new technologies to facilitate the delivery of regulatory requirements" is playing a crucial role in helping banks navigate and manage compliance obligations, while defining compliance controls.

Adoption of new technologies to facilitate the delivery of regulatory requirements is playing a crucial role today

Banks have long been grappling with the challenge of identifying and unraveling regulatory obligations in a stringent economic climate. A constant flux in the regulatory environment has heralded fierce competition within the financial services domain; this has been aggravated by high capital costs and a truncated workforce. Regulators in the UK, along with European institutions such as the European Banking Authority (EBA), have been imposing multiple filing requirements on European banks.  This includes COREP and FINREP, which are further compounded by highly quantitative and data-intensive exercises called QIS and Stress tests.
Modern day technology in the financial sector leverages cloud computing, blockchain, machine learning, APIs, and cryptography. All these features accelerate innovation and introduce new solutions in the field of compliance and regulatory reporting. Technology providers, consultancies, banks, and start-ups are currently realizing the potential of RegTech solutions. They are exploring ingenious means of utilizing cloud computing and machine learning which can be applied to provide the appropriate infrastructure and standardize compliance processes.

Technology providers, consultancies, banks, and start-ups are currently realizing the potential of RegTech solutions

Moreover, financial institutions are leveraging platforms to integrate and implement new applications. The Institute of international Finance (IIF) located the following key areas which can be improved with the application of RegTech:-

  • Risk data aggregation
  • Modeling, scenario analysis, and forecasting
  • Monitoring payment transactions through cloud computing and machine learning
  • Identification of clients and legal staff
  • Monitoring internal culture and behavior in a financial organization
  • Trading in financial markets
  • Incorporating new regulations

At HCL, the Risk & Compliance practice is at the forefront of finding new solutions for clients. We aid enterprises in embracing new technologies and transforming their businesses – allowing them to thrive in a challenging marketplace.