John Byrne, CEO at Corlytics
A year or so after ‘RegTech’ became a buzz word in financial services, what are the key enablers and barriers to its adoption?
Although RegTech has only just become a buzz word, financial institutions are long used to using regulatory technology. The difference with the current buzz around RegTech is the opportunities that regulated firms and regulators perceive RegTech to bring.
The key enablers to RegTech are the myriad of problems that organisations face with overwhelming regulatory complexity and uneven, overlapping regulatory timeframes. Regulated firms need help with making the complex simple. Also, the gap between regulatory intent of regulators and interpretation of these regulations provides an opportunity for providers to bridge the gap.
The key barriers to adoption of RegTech are multi-fold. Firstly, there is a lot of noise in the market which makes the buying process for regulated firms difficult. Many RegTech vendors, even though they have a good idea, do not properly understand the problems faced by regulated firms. Long sales cycles and procurement processes mean that RegTech firms needs to be focussed and funded or risk going out of business before their technology is adopted.
How should RegTech providers, FIs and regulators be working together to create holistic solutions? How can collaboration programs work, in practice.
RegTech providers, FIs and regulators should be working together to make regulatory intent – the actual regulations – clear, understandable and implementable, so that they are properly interpreted.
At Corlytics, we use our multi-layered regulatory taxonomy in the major global regulators to create intelligent handbooks that are fully taxonomised. We also extract intelligence from regulatory enforcements, enabling financial institutions to understand at a regulatory category, product/service line, regulator, jurisdiction and control level why enforcements are levied on a global basis.
This means that we can accurately map regulatory intent from handbooks right through to interpretation failings so that FIs can address these failings.
This collaborative process means that we can work on better regulatory outcomes for everyone.
The MiFID II / MiFIR implementing legislative acts require a significant number of actors – located within as well as outside of the EU – to obtain an LEI that are under no such obligation to date.
Which regulations are stopping innovative products and services from being brought to market? How can RegTech help firms to overcome this?
I don’t look at regulations as being a barrier to innovation. Quite the opposite, I believe that regulations are put in place to try to protect consumers, customers, the financial services system and ultimately global economies. To this end, RegTech firms can help organisations to drive down the ever-escalating cost of regulatory compliance – we know it’s on the increase year on year. Not only that, by accurately measuring regulatory risk, RegTech firms like Corlytics can help organisations to impact the bottom line by moving regulatory and legal provisions from the balance sheet back into the business to be invested in core products and services.
RegTech can provide a competitive advantage to FIs who properly embrace the capabilities it brings.
Which key regulatory compliance challenges would you most like to see being tackled by RegTech providers?
The biggest challenges that I would like to see RegTech providers help solve are as follows:
- Measuring Regulatory Risk using a data driven approach. Current approaches to measuring regulatory risk do not provide the same rigour as monitoring market risk or credit risk. FIs need help with using a data driven approach to properly understanding their exposure
- Enable FIs to more easily understand regulatory obligations across the
- Provide a mechanism for collaboration between regulators and financial institutions.