Guest blog by Lucie Truchet, regulatory business analyst at Suade

In the first of a series of white papers from London-based regtech Suade, they weigh up shifting regulatory reporting from a “push” model to a “pull” model. The paper argues that reduced reporting costs and less complexity could be the big wins for the industry going against the status quo – but what do you think? Suade is inviting building societies and credit unions to have their say here.

Traditionally, supervised firms have "pushed" data to their supervisors. This means sending a pre-defined report on a weekly, monthly or quarterly basis that can be processed and analysed.

An alternative approach is for firms to make data and reports more readily available so that supervisors can come and "pull" the information on demand or at pre-defined intervals.

In other words, a pull-model is a system where regulatory data is directly sourced from a highly detailed, complete, and fully granular standardized data model from every single institution via APIs and real-time connectivity.

The data is accessed by a standardized logic to be imported, processed, and returned in standardized and ad-hoc formats for the regulator.

Given there is ordinarily one financial regulator and many financial institutions to regulate, taking a "push" approach is more easily implemented, maintained and on-boarded, which may explain why it has become the norm. 

However, since the 2008 financial crisis and Governments across the world regulating financial services companies more closely, there has been a struggle to process and interpret the enormous volumes of data their businesses must hold.

With that comes the challenge of data management, resourcing, quality and timing for both regulators and their institutions. An answer to these challenges would be the implementation of the pull model presented above, establishing a more "on-demand" approach to data.

The case for shifting to a “pull” model

The main benefit for the industry is that this model will virtually end the need for regulatory change on the side of financial institutions after a few iterations.

This is because, with only a finite number of information and data fields added to such a granular data model, it would significantly reduce reporting costs for firms in terms of the effort they have to go to in interpreting new reporting instructions.

The regulator would then be able to build new regulatory templates flexibly, without action required by the financial market.

Moreover, this model increases the quality, timeliness, completeness, and transparency of regulatory reporting.

With each firm making their data more transparent, more catered monitoring and supervision techniques become possible for different business models and different firm sizes/types.

It also means less of a need for the processing and storage capabilities on the supervisors’ side as data and reports can be recreated as needed.

But you had all the information?!

A pull approach also means potentially more onus on the supervisor to digest, understand and respond to the data, and costs for the firms revamping the current system.

Moreover, does "but you had all the information" become a valid firm response to a crisis scenario?

Finally, banks might feel unease about the regulator or central bank having direct access to their systems, notably for security implications (pulling and storing large volumes of data securely, accountability in the event of a security breach, etc.).

Keeping these elements in mind, the pull-based model could be gradually phased in to gain experience with granular data and give time to adopt regulation and legislation towards the new architecture.

If the model seems to yield the envisaged benefits, the legacy push-based infrastructure could be migrated gradually to the new pull model. Thus, we would see a natural shift of regulatory development from “waterfall supervision” to “agile supervision.”

The shift from a regulation-driven to data-driven regulatory reporting is also a perfect base layer for the application of emerging technologies.

Just think of the likes of blockchain (regulation execution, data collection, and transmission), artificial intelligence (data validation, processing, and analysis), cloud computing (storing, processing) or quantum computing (calculations). These are all moving towards regulation 2.0.

Get in touch and have your say

How do you feel about shifting to a “pull” model for regulatory reporting?

Do the benefits of a “push” model in terms of reducing costs and complexity in the long-term outweigh the short-term implementation and investment costs?

To have your say about the push vs pull models, please get in touch via lucie@suade.org by the end of the month.

We are gathering views from financial services firms and regulators and everyone that provides feedback will get early access to a copy of the final white paper, which will be out on 1 December 2022.

Accompanying the white paper will be a roundtable discussion and other presentations, allowing for in-person dialogue on the topics addressed with senior industry members and regulators.

Suade is a London-based RegTech organisation that provides a standardised approach to regulatory reporting at building societies, banks and financial institutions.

The views, opinions and positions expressed within guest blogs are those of the authors and do not necessarily represent those of the BSA.