Which regulatory initiatives are having the most impact on your business during 2021? Please provide examples of how you are responding to specific regulatory requirements.
Valérie Nicaise: As a leading securities services provider, our role is to help our clients – including asset managers, asset owners and alternative investors – adapt to regulations. We provide them with powerful reporting solutions that reduce their administrative burden and are compliant with the latest regulatory requirements.
In 2021, as far as reporting is concerned, our areas of focus regionally and globally include:
- Assessing the impact of ESG-related regulation (notably the Sustainable Finance Disclosure Regulation and the EU taxonomy) on existing reporting for institutional investors, as well as the impact on clients’ data needs. We have been actively participating in the associated European working groups such as FinDatEx in order to define a standardised way of exchanging ESG data between market participants and to improve existing data templates for other regulations
- Investing globally in our data solutions in order to improve the consistency and coherence of reporting for different regulatory regimes. For example, EMIR in the European Union (EU), Monetary Authority of Singapore (MAS) and Australian Securities and Investments Commission (ASIC) all require forms of OTC transaction reporting and we have invested in developing consistent, in spite of the specificities per regulation, and high-quality reporting across these regions, which is particularly valuable for clients with operations across multiple jurisdictions.
- Rolling out in Europe a new solution to provide PRIPS KID reporting for UCITs fund, due to replace the existing UCITS KIID reporting in 2022
Often firms have to undertake reporting across multiple regimes and jurisdictions, how can or should this process be streamlined?
Regulatory reporting across jurisdictions and asset classes can be challenging, firstly due to the multiplicity of requirements which may at first appear similar but differ on closer examination. Secondly, the diversity of instruments and asset classes in our clients’ portfolios often necessitates separate treatment from a regulatory perspective, such as OTC derivatives or private equity instruments.
In this complex environment, regulators are paying increasing attention to coherence and consistency of reporting across reporting regimes. Therefore, we see it as a real priority to develop an ecosystem across geographies and asset classes, through greater mutualisation of data, tools and teams.
At BNP Paribas Securities Services we have invested in a global operating model that combines local expertise, aimed at monitoring local regulation and building relationships with local authorities, with centralised centres of expertise responsible for providing solutions globally. Our centres of excellence in Europe and APAC play a vital role in streamlining our reporting processes. We have started to build a dedicated platform, which leverages the latest tools and technologies from partners. Using this platform, we can implement key functions such as calculation, report filing and dissemination, from a single, integrated system.
Are firms equipped with the right approach toolset needed to manage high volumes, data quality issues and complex reporting relationships required to evidence their control framework?
When outsourcing, our institutional investor clients are still responsible for reporting to their own clients and their regulators. The key issue is this: how can they control the quality of reports provided by their providers without controlling every single data point?
The best approach is to put in place a robust, automated data quality control at the very beginning of the value chain, data quality check points at sensitive steps of the process, and finally, relevant data quality indicators at the end of the value chain.
As a securities services provider, our role is to provide information that enables clients to control the quality of regulatory reporting that we perform on their behalf. Of course it isn’t possible to perform data quality checks for every single data point, given the high volume of data. Therefore, we provide synthetic indicators enabling clients to detect errors. If a client suspects an error, our online tool enables them to drill down and control the data at the most detailed level of granularity. It requires investment in the control framework in addition to the reporting production itself, and for this control framework to be incorporated from the beginning as part the project plan rather than added on afterwards. This is where a strong partnership between the outsourced services provider and institutional investor is key, as the service provider can help to integrate and manage the control framework from the very beginning.
Firms can benefit from an enterprise data repository however the nirvana of a golden record source for use across the enterprise has its challenges. How are firms tackling this challenge?
Many legacy operational platforms are not designed to import external data, and rely on data being created directly within the platform. Different platforms need different levels of granularity of data and updates at different times. As a result, many firms still use manual and bespoke processes which prevent an enterprise approach to data management and make it difficult to maintain a golden record source.
Some investment firms are tackling this by redesigning their architectures to introduce data warehouses, data lakes or datahubs, all of which have different roles, in order to control the storage, maintenance and distribution of referential data and their subsequent golden records more effectively.
Another important element is data governance. Firms can improve their data governance by assigning ownership of key processes such as the creation and maintenance of data to data stewards. These individuals have ultimate responsibility for the firm’s data quality, defining rules for creation and maintenance of the golden record, and recommending upgrades to legacy platforms where necessary.
Are there any lessons to be learnt from regulatory data integrity and control processes that can be applied to other complex data processes?
Regulatory reporting requires strict, permanent and systematic data integrity and control processes. Data tracking and auditability are also key characteristics of regulatory reporting data. As a result, regulatory reporting books of records have a high quality of data, accuracy, completeness, consistent with market standard formats and auditability and tracking.
In my experience, the standard and integrity of this data means it can be used beyond regulatory reporting: for example, for risk management in adhering to Solvency II. Another example is where this data can be used as an input into a centralised data lake for funds’ online marketing or distribution purposes. In this way, regulatory reporting data can offer a real opportunity to improve an investment firm’s data quality for other purposes, benefitting the investment firm’s value chain and their clients.
From “The devil is in the data”, panel organised by the Asset Servicing Times Asset Servicing Times magazine issue number 269