As of April 1 2013, UK has a new regulatory regime. The Financial Services Authority (FSA) will cease to exist in its current form, and two new regulators - the Prudential Regulatory Authority (PRA) and Financial Conduct Authority (FCA) - will come into being. The FCA will be the UK financial services regulator responsible for the conduct of all firms, which were previously regulated or supervised by the FSA (except clearing houses and settlement systems). The PRA will be responsible for the prudential (i.e. essentially systemic risks impacting capital and liquidity) regulation of all deposit-takers (including banks, building societies and credit unions), insurers and a small number of systemically important investment firms.
The new structure seeks to close gaps in regulatory information gathering and legal powers. To comply with the new regulations, organizations will need to modify their approach, creating a more integrated and holistic risk framework with investment likely in operational changes and technology infrastructure. Failure to have such plans in place may result in non-compliance and negative regulatory attention.
The reporting requirements create the need for data agility. In my view, this is the means to report completely, accurately and on time to multiple users (in flexible formats) in a cost effective and efficient manner. Most firms will need to enhance their data quality and database structures to meet this challenge. Regulators expect strategically important firms to meet higher standards - with this covering capital, liquidity, stress testing and also data, documentation and reporting capabilities.
Analytic capabilities need to be extended to help and enable the Board. If the regulator (PRA) is more quantitative - driven by data and analysis, it makes sense to be at least one step ahead. Once data agility is achieved then analytic and reporting capabilities can be extended. Risk governance and culture will need attention too. At a minimum, Boards should establish a baseline for the risk culture and objectively measure progress across several dimensions over time.
Only a few banks have invested in the necessary technology to fully meet such requirements. A long term program that covers data, reporting and controls will be required. Partnering with a strong service provider who can help accelerate and leverage investments made across the risk and finance areas may be helpful, so that financial institutions can better meet the likely challenges emerging from the new UK regulatory structure.