Shearman & Sterling LLP | FinReg | Bank of England and UK Conduct Regulator Announce Proposals for Financial Sector Data Reforms
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  • Bank of England and UK Conduct Regulator Announce Proposals for Financial Sector Data Reforms

    The Bank of England and U.K. Financial Conduct Authority have published a series of proposals setting out their plans to enhance their data and analytics capabilities. The proposals include a revised FCA data strategy, a BoE discussion paper on transforming data collection and a viability report published by the FCA and BoE, together with seven regulated firms, on the possibilities of digital regulatory reporting. The FCA and BoE depend on data to conduct their supervisory responsibilities.  Both wish to capitalize on recent technological developments to enhance the effectiveness of their data collection processes as well as alleviate the burden on reporting firms.

    The FCA’s revised data strategy takes account of the advances in analytics techniques that have emerged since the FCA published its first data strategy in 2013. The FCA plans to harness these developments to assist in its regulation of firms and to reduce the burden firms face in regulatory reporting. Key aspects of the revised strategy are to use data to deepen the FCA’s understanding of markets and consumers, swiftly identify, connect and react to firm and market issues and build a flexible, future-proof organization. The data strategy will be rolled out over the next five years through initiatives such as a new FCA data operating model, improvements to the central data services supporting the FCA’s governance and employment of new data management and analytical tools. Over the next 12 months, the FCA will focus on increasing its data science resource, testing new tools such as web scraping and considering new tools to detect financial crime.

    The BoE’s discussion paper on transforming data collection from the U.K. financial sector seeks input from all interested parties on the bank’s proposals for reforming its data collection processes over the next ten years. The paper is based upon the proposals set out in the 2019 Van Steenis “Future of Finance” report, in which BoE financier Huw Van Steenis set out his vision for the BoE’s role in supporting the medium-term future of the U.K. financial system. The discussion paper seeks feedback from all regulated firms (including banks, insurers and financial market infrastructures) on the potential costs of existing reporting processes, the development of common data inputs to determine how such firms request data and how they may source it, potential improvements in how the BoE requests data and how the holding and accessing of data may be restructured. Responses to the paper should be submitted by April 7, 2020.

    The BoE and FCA’s viability assessment on digital regulatory reporting is a collaborative effort with seven major banks (Barclays, Credit Suisse, HSBC, Lloyds, Nationwide, NatWest and Santander) to determine how technology could be used to facilitate firms’ regulatory reporting obligations and improve the quality of information they provide to the FCA. The assessment is part of the FCA’s investigation into regulatory reporting, which began with the FCA’s 2017 TechSprint, examining how technology could make regulatory reporting more accurate, efficient and consistent. This gave rise to a proof of concept that was then tested in the digital regulatory reporting pilot, which ran for six months from June 2018 and involved a selection of participants testing a tech product to evaluate the benefits of machine readable and executable regulatory reporting. The viability assessment sets out a series of scenarios which model how digital regulatory reporting could be implemented in the U.K., using the U.K. mortgage reporting domain as an area of focus. It draws certain conclusions, including that digitizing regulatory reporting rules could deliver other benefits e.g., increased transparency of regulation. The report finds that further investigation into digital regulatory reporting is warranted and the business case for digital reporting is strongest when implemented across multiple domains (i.e., not just in a single sector such as the U.K. mortgage market).

    View the FCA's Data Strategy.

    View the Bank of England's Discussion Paper on transforming data collection.

    View the Viability Assessment on Digital Regulatory Reporting.  

    View details of the Van Steenis "Future of Finance" report.

    View details of the FCA's Phase 1 digital regulatory reporting pilot.
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