UK Financial Conduct Authority Consults on Machine Executable Regulatory Reporting

The Financial Conduct Authority is seeking input on using technology to assist firms to meet their regulatory reporting requirements. The FCA would like to improve regulatory reporting by firms so that it is more accurate, efficient and consistent, less reliant on human interpretation and quicker for firms to implement changes to the requirements.

As part of its RegTech strategy, the FCA holds regular TechSprint events which are attended by financial services providers, technology companies and financial regulation experts to develop solutions to regulatory challenges. The Call for Input explains the proof of concept for Model Driven Machine Executable Regulatory Reporting which emerged at the November 2017 TechSprint.

The proposed Model Driven Machine Executable Regulatory Reporting has the potential to make regulatory reporting requirements machine-readable and executable, enabling firms to use automated, straight-through processing of regulatory returns. The proof of concept successfully used rules from the FCA Handbook, the Prudential Regulation Authority's Rulebook and International Financial Reporting Standards, illustrating the possibility for firms to comply with multiple regulatory reporting requirements.

The FCA thinks that the introduction of this technology would be of significant benefit to firms and regulators because it would bring increased clarity on the rules, efficiency in reporting, responsive regulation and better quality of data. The FCA notes that implementing machine-executable reporting would involve substantial challenges. These include, for example, developing the most effective governance mechanism to decide and manage the implementation, determining whether it would be practical to introduce it across the industry or only for some regulated firms and the impact on the legal and liability positions of both regulators and regulated firms. There would also be costs implications. However the FCA considers at this stage that the costs involved in moving to a more technology-driven regime, which it would seek to recover from industry, could be offset by other costs savings to regulated firms. The FCA is interested in collaboration with its international counterparts and seeks feedback from other regulators and standard setters on the proposal, including on whether international collaboration would involve a common data model.

Responses to the Call for Input are requested by June 20, 2018. TechSprint participants will host a series of roundtables to discuss further the legal, technological and regulatory issues arising from the proposal which interested parties can request to join (details in the Call for Input). In Summer 2018, the FCA intends to publish a feedback statement to the consultation responses as well as input provided through the roundtables and other discussions.

View the Call for Input.