Helping firms with global regulatory compliance during a year of unparalleled change

by Leo Labeis, CEO, REGnosys

The Industry Challenge

Given the typically fragmented nature of global regulatory reporting, 2024’s intense calendar, while challenging from an implementation perspective, is welcome as it accelerates the pace of data harmonisation across jurisdictions.

For instance, the Bank of England that regulatory reporting is a significant burden to UK banks, costing them a minimum of £2 billion to £4.5 billion annually. Yet, despite a year of unrivalled overhaul for trade reporting, investment in compliance has actually dropped since last year. In addition, another recent study found that only 22.2% of central banks have a RegTech strategy in place, up from 19% in 2023, while a third of respondents said they currently have no RegTech tools at all.

Despite firms’ reported optimism around being compliant, this de-prioritisation is placing compliance teams under increasing pressure and scrutiny. Firms that develop their reporting solution are exposed to non-compliance through inconsistencies and risk the duplication of costs. In contrast, the adoption of third-party solutions can increase compliance safety while reducing costs.

However, in the current RegTech vendor landscape, solutions typically lock clients in once deployed, with the risk of failing to update their platforms appropriately as regulations change or offering a product that struggles to integrate into a client’s existing solution.

During a year of intense regulatory changes and with legacy solutions falling short of the mark, we are charting a more effective path to compliance.

The Gold-Standard Solution

REGnosys’s Rosetta platform is the first and only reporting platform to harness ISDA’s Digital Regulatory Reporting (DRR), providing a cost-effective and fast deployment of the industry’s gold-standard compliance solution.

DRR is an industry-led programme designed to mutualise the cost of interpreting and complying with global reporting requirements. By collaborating through DRR, the industry has developed a standardised interpretation of the rules which are accessible both in human-readable and machine-executable formats.

Progress to Date

We have already passed several key regulatory reporting milestones in 2024, with more on the way, and DRR has emerged as a key tool in helping firms keep pace.

The first regulatory update of the year was version 3.2 of the CFTC rewrite on January 29^th, after an initial rollout of the rewrite in December 2022 following the post-Dodd Frank review that began in 2015. A key update in version 3.2 was the Unique Product Identifier (UPI) mandate, a global first that DRR was able to support successfully.

A further version, 3.3 is anticipated to go live next year with an additional 49 reporting fields being recommended by the CFTC, which is a testament to the rewrite’s complexity.

More recently, the Japan Financial Service Agency (JFSA) reporting regime update, which rolled out on April 1st, ushered in significant changes in how firms report derivatives in APAC and is expected to increase the number of firms required to report.

The European Union version of the EMIR Refit closely followed it on April 29^th, which saw a host of new reporting requirements along with an increase in reporting fields from 125 to 203.

DRR had been in User Acceptance Testing (UAT) for both EMIR Refit and JFSA since December 2023 and was ready for production in February of this year. Participating firms were able to save on resources by gaining insights from their peers while side-stepping the need to either build or buy their own solution. Both regimes were the first to introduce the mandate to report in the ISO 20022 format, which DRR fully supported.

Still to come in 2024, the UK version of EMIR Refit is due in September, while MAS in Singapore and Australia’s ASIC rewrites are both set for October. Following an extension of IDA’s DRR to further reporting jurisdictions, the DRR code has already been available in UAT for market participants to review and test ahead of the upcoming UK, Australia, and Singapore rewrites’ compliance dates and will be ready for production by the end of June.

Collaborating with DTCC

As part of the wider commitment to support compliance with evolving trade reporting requirements, REGnosys is connecting its Rosetta platform to the testing environment of DTCC’s Global Trade Repository (GTR) service, the industry leader in trade reporting. As the only industry-owned and governed global provider of trade reporting services, GTR is uniquely positioned to help market participants address some of their most important operational and regulatory challenges in an ever-evolving environment.

The first phase of this collaboration involved testing and support within the aforementioned JFSA and EU EMIR refits while testing for the upcoming EMIR-UK, ASIC and MAS reporting has already begun.

Aside from allowing testing in alignment with the industries’ mutualised interpretation rules, the collaboration also future-proofs firms since Rosetta will automatically implement any updates to the rules that are integrated into DRR.

What’s Next

As we reach the midpoint of the year, the global regulatory landscape has already experienced significant changes in various regions. With numerous deadlines on the way for the UK, Singapore and Australia, the benefits of a holistic solution that serves the industry’s global reporting needs is becoming clear.

The risk of non-compliance brings with it a host of potential pitfalls for firms ranging from financial penalties to operational disruption and market access restrictions.

Furthermore, regulators are growing increasingly concerned with the efficacy of outdated legacy technology, where firms are required to sift through hundreds of pages of legal documents, manually interpret them, and code onto internal IT systems. This can lead to consequential non-compliance risks, along with a risk of burnout with 1 in 5 surveyed in-house compliance teams burdened by manual and repetitive tasks

The future of regulatory reporting is now. Firms that get on board with modern reporting solutions sooner rather than later stand to gain the most through ensuring compliance today and future-proofing the operations of tomorrow.