The phrase in quotes is rooted in a riddle: “Where does an 800 lb. gorilla sit?” The answer: “Anywhere it wants to.” The term is meant to illustrate the disparity of power between a hypothetical “800 lb. gorilla” and everyone else. In reference to the US regulators, in many cases it seems we’re operating in a “guilty until proven innocent” regulatory environment, hence the 800 lb. gorilla metaphor.
Bank regulations subject banks and other financial institutions to certain requirements, restrictions and guidelines. This regulatory structure creates transparency between financial institutions and the individuals and corporations with whom they conduct business, among other things.
Given the interconnectedness of the banking industry and the reliance that the national (and global) economy has on banks, it is important for regulatory agencies to maintain control over the standardized practices of these institutions. Supporters of such regulation often hinge their arguments on the “too big to fail” notion.
It has been said that many financial institutions (particularly investment banks with a commercial arm) hold too much control over the economy in reference to a potential business failure. This is the premise for government bailouts, in which government financial assistance is provided to banks or other financial institutions that appear to be on the brink of collapse. The belief is that without this aid, the crippled banks would not only become bankrupt, but would create rippling effects throughout the economy leading to systemic failure.
Here are some general objectives of the most common regulations:
- To reduce the level of risk to which creditors are exposed (i.e. to protect depositors)
- To systematically reduce risk —to reduce the risk of disruption resulting from adverse trading conditions for banks causing multiple or major bank failures
- To avoid misuse of banks—to reduce the risk of banks being used for criminal purposes, e.g. laundering money or other assets resulting from the proceeds of criminal activity
- To protect banking confidentiality
- To provide proper credit allocation
- It may also include rules about treating customers fairly and having corporate social responsibility
Empirical results have illustrated that past approaches to governance, risk and compliance are inadequate in both design and execution. Senior executives get fragmented views of their true business performance and inefficiencies not only lead to potential fines, they drive up operational costs.
The common regulatory challenges remain a conundrum since the regulations are evolving and they require increased reporting burdens among multiple regulators, more and varied data and increased reporting frequency with shorter time frames. This process leads to less visibility of costs, quality issues and unplanned regulatory inquiries.
The basic problem lies in a high occurrence of manual effort, spreadsheets, data integration, reconciliations, adjustments, reviews, lack of controls and a general lack of auditability. In short, the process is plagued with too much variance, non-repeatability and simply lacks business agility.
Our solutions for regulatory reporting raise regulatory performance across the enterprise. We can create this end result by:
- Using standardized data and regulatory reporting processes
- Providing a self-service capability for customers to generate their own regulatory reports with full auditability and controls
- Facilitating constant evolution of the solution supported by robust technology architecture that is easily configurable
- Minimizing upfront expenditure and IT involvement in producing reports
- Reducing dependency on rigid packaged solutions and use COTS approaches
- Providing full visibility of reporting obligations across multiple jurisdictions via dashboards that include due-dates, compliance issues, regulatory queries, responses and tracking.
Regulatory reporting is and will continue to be one of the most pressing public policy issues of our time —the reform of regulatory and enforcement practice. Any reporting solutions for reform centered only on concepts of customer service and process improvement fail to take account of the distinctive character of regulatory responsibilities which ultimately involve the delivery of regulated obligations rather than just services.
We have “tamed the 800 pound gorilla” by executing on a regulatory reporting model centered on standardizing processes, integrating information across the enterprise and delivering intuitive data-driven business insight through the use of self-service technology and analytics.
Regulatory reporting is here to stay and we plan to be an integral part of the industry-solution. Are you ready to be part of the solution?