RegTech appears to be catching the imagination of the press and vendors alike, with many commentators predicting 2017 to be the year it takes off.
Definitions vary, but according to the UK’s Financial Conduct Authority, “RegTech is a sub-set of FinTech that focuses on technologies that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities.” Certainly, RegTech systems are being increasingly embraced by banks.
Here FinTech Finance exclusively speaks with Richard Bennett, Head of Regulatory Reporting for EMEA in Wolters Kluwer’s Finance, Risk and Reporting business, about the drivers behind RegTech and how the firm is adapting its offering with its holistic approach.
Q: At the end of 2016 Wolters Kluwer took part in a hackathon organized by The Financial Conduct Authority on RegTech. Can you talk the rationale behind such events?
A: The event, “Unlocking Regulatory Reporting,” was designed to improve the interface between the regulator and regulated firms, allowing participating firms to discuss the practical uses of RegTech.
Such events allow the regulator to engage collaboratively with the industry to encourage the development and adoption of solutions that improve regulatory outcomes.
Fundamentally, the ability for technology solutions to handle mounting regulatory reporting challenges, in a much more timely manner, is going to be an ongoing challenge for the industry. Accordingly, RegTech systems are being embraced by banks and regulators alike and are occupying an expanding segment of the broader FinTech universe. The opportunity we had to work collaboratively with the FCA on the subject demonstrates the willingness and commitment of the regulator to convene parties and work with them to assess and solve problems at the regulatory interface.
Ultimately such events are designed to prompt the industry to develop technology solutions to streamline regulatory reporting and improve understanding of compliance requirements.
Q: So what’s behind the interest in RegTech?
A: As way of background when speaking about RegTech it’s important to understand the regulatory drivers at play.
Just three years after CRD IV and CRR were finalised, the European Union’s banking sector now faces a revised Capital Requirements Directive and Capital Requirements Regulation, CRD V and CRR II. Thanks to a 500+ page package these revisions to CRD IV and CRR could mean we see significant regulatory change well past 2020.
Arguably, the bulk of this new content is driven by the need to adopt various international regulatory standards into EU law. But the EU has, interestingly, shown a willingness to depart from the Financial Services Board and Basel Committee on Banking Supervision rules to accommodate what it terms European ‘specificities’.
These legislative proposals will now be submitted to the European Parliament and the Council for their consideration and adoption. As a result, the CRD V CRR II proposals will be among incredibly important regulatory developments for banks operating in the EU in the coming years. All banks will require in-depth analysis as to what it will mean for them.
Q: What are the particularly attractive features of RegTech to banks?
A: RegTech is devoted exclusively to compliance and related issues, such as risk analysis and management. And one promising feature of the technology is that it should be able to work with existing systems since RegTech tends to be heavier on software than hardware.
Such systems should keep institutions ahead of the game by allowing them to keep track of, and adjust to, new rules as soon as they are implemented.
Q: Presumably, with all this in mind, vendors are now reacting. What is Wolters Kluwer doing to adopt its offerings here?
A: As these regulations come to the market Wolters Kluwer is evolving its OneSumX offering into a service-oriented architecture (SOA) where services are provided to the other components by application components.
Q: Can you provide any more details on the SOA?
A: The basic fundamental principles of service oriented architecture is independent of the enterprise or single desk based operational models. A service is a discrete unit of functionality that can be accessed remotely and acted upon and updated independently i.e. it can be either centralised or distributed.
OneSumX has evolved an In-Memory Data Fabric i.e. a high-performance, integrated and distributed in-memory platform for computing, aggregating and transacting on large-scale data sets in real-time, orders of magnitude faster than possible with traditional disk-based or flash technologies.
The OneSumX data grid is a key-value in-memory store which enables caching data in- memory within distributed clusters. It has been built from the ground up to linearly scale to hundreds of nodes with strong semantics for data locality and affinity data routing to reduce redundant data noise.
Distributed computations are performed in parallel fashion to gain high performance, low latency, and linear scalability. The compute grid provides a set of simple APIs that allow users to distribute computations and aggregation processing across multiple computers in the cluster.
Distributed parallel processing is based on the ability to take any computation or aggregation and execute it on any set of cluster nodes and return the results back.
One of the capabilities of OneSumX is the distributed in-memory file system. This delivers similar functionality to Hadoop HDFS, but only in memory. In fact, in addition to its own APIs, OneSumX implements Hadoop FileSystem API and can be transparently plugged into Hadoop or Spark deployments.
Q: And what are the benefits of this approach?
A: Through this evolution Wolters Kluwer’s clients will be able to respond in a more agile way to the Regulator’s changes.
Notably, they will be able to reuse the data to manage their business in a more efficient manner thus freeing up a “RegTech Dividend”.