BCBS, GSIB, SFIB and SIFI Compliance Costs Are Rising
Due to post-Dodd-Frank regulation proliferation, compliance costs for banking and financial services institutions are skyrocketing. According to the Financial Times, some banks have added as much as $4B in expenses related to compliance technology and staff, especially those designated as Globally Systemically Important Banks (GSIB). One compliance regulation in particular is an especially thorny issue: BCBS rule 239, which applies to data management and risk data aggregation reporting, tracking aggregated risk data usage from source to report. One financial services company we know had to buy an insurance policy for the one person who had built their compliance portal and was the only one who could maintain it!
Small to mid-level players aren’t immune, either. Regional banks must now invest in regulatory compliance (due to being designated as DSIB: Domestically Systemically Important Banks) over developing new products or growth projects, ultimately affecting their bottom line. A recent survey of American small banks released by the American Bankers Association found that more than 46 percent had reduced their product offerings, including loan and deposit accounts, due to regulatory compliance burdens, and that their customer service is lacking as they struggle to comply with fewer staff and much smaller budgets.
From scaling up staffing, to training on ever-changing rules, to ensuring data compliance across all users, one thing is clear: compliance costs are rising to record levels across the entire financial services industry.
Financial Services Risk Aggregation Reporting: A Trifacta Case Study
One of Trifacta’s clients, a highly-respected Globally Systemically Important Bank (GSIB) with 70 years of experience, 60 offices worldwide, and $995B under management, was grappling with all of the above compliance issues. Like most Trifacta clients, this client wanted an enterprise-wide solution to accelerate time to insight while reducing the costs of data preparation. But as a financial services firm they must also comply with The Basel Committee on Banking Supervision (BCBS) rule 239, which applies specifically to a firm’s data architecture, lineage, and governance policies. In short, Trifacta’s client couldn’t implement any data solution that put their source data or data lineage at risk of non-compliance.
Built from the ground up by financial services professionals, Trifacta Wrangler helped this financial services company save money and time on compliance analytics – while still staying in compliance– by:
- Moving from home grown, hand coded SQL/Java/Oracle applications and Excel, all requiring idiosyncratic institutional knowledge; to one enterprise wide source of data “truth. “
- Preserving source data and data lineage—actually improving on prior lineage tracking methods—so that they as a GSIB can prove where their aggregated risk management numbers came from. In a way it’s as though a recording was made of the data’s path from the Hadoop warehouse to the analyst’s report. This way, a financial services company can provide this information if ever needed by an auditor, including metadata and a business glossary.
- Making more data available to end users on a self service basis, reducing IT overhead costs and accelerating speed to business insight.
- Moving from disparate data sources into a standardized regulatory reporting infrastructure and data analysis workflow process across all workgroups
- Increased agility in turning around compliance and regulatory reports.
Compliance In Financial Services: Trifacta For The Win
A standardized data wrangling approach will not only reduce costs by limiting time spent importing, formatting and manipulating by individuals, it will do so by also improving the accuracy, speed and quality of reporting enterprise-wide. This is especially critical for financial services providers, who must understand who has touched data throughout the firm and provide in-depth data lineage to prove compliance with BCBS 239, among other new requirements.
Similarly, when staffing costs are directly related to the personal liability of reporting managers in a firm, an investment in technological standardization means not only a reduction in stress for key staff, but also an overall lowering of recruiting and retaining costs for the firm.
More information about Trifacta’s financial services experience is available here. The Royal Bank of Scotland, another Trifacta financial services client, spoke on the record about how Trifacta helped them wrangle customer data for better financial performance.