The Importance of Startups in Helping Financial Institutions Face Their Regulatory Needs

April 12 2018

One of the most significant challenges financial institutions face is the lack of new technology and the inability to update IT infrastructure to meet their regulatory needs. When it comes to regulatory reporting, banks often face technology challenges such as system limitations, data integrity, and data availability. These challenges exist because of the large amount of data sources used by banks that need to be aggregated for the reporting process, strict requirements and deadlines demanded by regulators, and multiple report formats that vary from one regulator to another. Due to these challenges, banks often look externally for regtech solutions, leading to the growth of regtech startups in the recent years.

Banks are regularly required to collect data and to process them in different formats based on the requirements of the specific regulator, which includes, but is not limited to, the Federal Reserve, SEC, FDIC, FINRA, CFPB, and state banking authorities. In addition, the regulatory environment is dynamic, and banks must be able to quickly deal with the introduction of new or changing rules. Therefore, banks need to streamline their process in gathering information, performing analysis, reconciling and auditing, and generating accurate and flexible reports to meet regulatory demands.

According to McKinsey, 10-15% of a financial institution’s total workforce is dedicated to governance, risk management, and compliance in 2017. Instead of using their resources and manpower to perform manual adjustments and reconciliations to their data, banks should instead focus on methods for automation and spend more time on performing analytics and on the review process. These are critical in assessing the accuracy and completeness of data prior to being sent out to regulators. Analytics that could be performed include trend analysis, variance analysis, and ratio analysis.

Here is where regtech startups like BaseCap Analytics come in. We provide specialized expertise on reducing manual intervention and creating automated processes, providing process documentations, and providing analytics that will ensure the accuracy of information reported to regulators via our consulting services and software solutions. Since there is no one size fits all or universal solution that will tackle every regulatory need, we are dedicated towards providing dynamic services and solutions to address our clients’ specific needs.