Update on UK’s digital regulatory reporting project
The FCA is exploring a new approach to how it receives data from firms. It has now released feedback from the financial services industry on how it could automate regulatory reporting. All eyes are now on the outcome of a pilot which is developing a prototype reporting mechanism.
Background to the latest FCA update
Positive feedback but with some diverging views
“We believe that a common data model would realise efficiencies in the current regulatory reporting process.”
Important legal questions outstanding
In our previous post on this project, we highlighted some of the legal challenges to making rules machine-readable. The FCA received concerns about, for example, liability, rule accuracy and data security.
“The pilot has proved that regulatory code can be sent as a smart contract and distributed to a population of firms”
What digital regulatory reporting could look like
- More collaboration: The FCA believes that continued collaboration with industry is fundamental but acknowledges that it may need to take the lead in some areas
- Start small: Implementation would likely to start with existing, relatively non-complex requirements to demonstrate the real-world application of the project
- Industry-funded: The FCA notes that upfront investment from firms will be required and should be shared appropriately across the industry
- Blockchain focus: The pilot is testing distributed ledger technology and smart contracts for its prototype. The FCA also says that there is potential for natural language processing to help disambiguate rules
- Open-source: The FCA aims for the outcome of the project to be an open platform on which additional proprietary solutions could be developed
“The capacity to call an API in a real-time environment is exciting from a regulatory standpoint however it opens up a number of issues for the firm in terms of capacity to review submissions before sending to the regulator.”
FCA Feedback Statement, October 2018