Lately, particularly after the financial crisis, the financial sector has witnessed an increase in regulatory requirements, both in terms of restriction and disclosure.
Compliance burns indeed lots of time and resources (human and capital), especially if we consider that implementing new legislative requisites may create integration issues with the existing technological framework. For instance, banks in Europe are estimated to have spent 55 billion euros on information technology just in 2014. However, only 9 billions were devoted to new systems, while the lion’s share to update and to keep the old technology going.
A standardised approach, based on a small set of controls adaptable and customisable to the peculiarities of different data sets, may be a much more cost- and quality-effective solution, instead of implementing new rules for each data set.
RegTech, as the new way in which regulatory requirements are handled through technology, aims to provide ‘nimble, configurable, easy to integrate, reliable, secure and cost-effective solutions’, producing regulatory data and reports by exploiting the system in place, as analysed by Deloitte in its Regtech is the new Fintech paper.
More specifically, the new RegTech approach differentiates itself from the prior way through which regulatory requirements were addressed. The employment of new technologies, for instance, enables to organise and to disentangle big, interlinked datasets, thus boosting agility; relying on automation with easily and quickly generated reports grants speed; moreover integration is enhanced and the use of analytic tools exploits ‘big data’ available for multiple aims.
RegTech is now the answer to efficient compliance and reporting obligations, but may also become a tool to manage, to control and to take decisions on the basis of compliance risks.