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Improve regulatory compliance with a core banking redesign

Read this article to learn about the benefits of “decoupling” compliance-related data into a regulatory layer in the core banking system.

Overview

Faced with a growing number of regulatory requirements and the urgent need to avoid hefty monetary fines and business interruption, banks must make significant investments in time and money to implement core banking systems capable of maintaining compliance.

Since this is a costly undertaking, bank executives must direct their compliance efforts and investments carefully and consider ways to reduce the complexity and expense of these systems. One way to do this is by “decoupling” compliance-related data into a regulatory layer. This can help banks standardize data, assess and control compliance more easily and improve their reaction time to new requirements, creating a more nimble, efficient and accurate compliance environment.

Background

One of the most significant legacies of the financial crisis is stepped up bank regulations and the ensuing compliance risk. Dodd-Frank, Basel and FATCA, to name just a few of these regulations, will roll out between now and 2020 and they are demanding significant bank resources in terms of time and investment in core banking systems capable of maintaining compliance.

Given the amount of money being spent, the urgency to remain compliant in order to avoid hefty monetary fines and business interruption, and the need to improve return on investment, bank executives must direct their compliance efforts and investments carefully.

In response, some banks are redesigning their core banking platforms to include a new, dedicated “regulatory layer” to handle the crush of compliance-related data more efficiently and minimize complexity, as well as to reduce operating expenses and yield higher returns.

Analysis

The process of placing compliance-related data in a regulatory layer is known as “decoupling,” because it seeks to separate the key information and logic needed by enterprise systems from product applications.

Regulatory logic is moved from individual core banking modules across the enterprise to the new regulatory layer and then the core banking modules send information to the regulatory layer in real-time. The information arrives in a raw format to avoid performance issues as well as variability among compiled and reported data from different areas of the organization.

The benefits of separating compliance-related data into a regulatory layer include:

  • Standardize data.

  • More easily assessed and controlled compliance.

  • Improved reaction time to new regulatory developments.

  • Easier and more accurate reporting.

  • More traceable data underlying reports—this is something that regulators are increasingly demanding to confirm the quality of the source data.

Recommendations

As industry leaders well know, regulatory expenses are weighing heavily on banks’ returns making it critical for bank executives to direct their compliance efforts and investments carefully. By decoupling key information and logic needed by compliance from product applications spread across the enterprise, and by redesigning the core banking platform to include a golden source of compliance data, a bank can create a more nimble, efficient and accurate compliance environment while also improving its online, real-time compliance capabilities.

Industry & topics highlighted

Banking Financial Services