Banks are under increasing pressure from regulators. Prudential regulatory reporting schedules have become more demanding in recent years, pushing finance teams even harder to meet their deadlines.
It’s not only the major players who find themselves in the regulator’s crosshairs, either. Mid-sized and regional banks are under similar scrutiny. Even so, many financial institutions continue to rely on manual regulatory reporting processes that are resource-intensive, time-consuming, and prone to human error.
Regulators are now encouraging banks to automate their approach. But what are the benefits, beyond keeping them off your back?
Why You Should Automate Regulatory Reporting
1. Alleviate the Pressure on Your Finance Team
Microsoft Excel remains one of the most popular tools for finance teams. But collecting data from your core banking systems and building reports manually takes time and effort.
Automated reporting software enables you to deliver accurate reports in a fraction of the time. This makes it easier to meet looming deadlines, which takes the pressure off your finance team and helps you build trust with regulators.
It also makes it easier to keep up with and respond to regulatory changes, so you’re not caught out by any sudden shifts in the compliance landscape.
2. Improve the Accuracy of Your Reports
It only takes one member of your finance team to hit the wrong key in Excel to bring the accuracy of your entire report into question.
This can lead to reputational damage and fines. In 2019, Nigeria’s central bank levied a charge totalling over 400 billion naira ($1.3 billion) on 12 banks for failing to meet a regulatory target based on their loan portfolio. Not long after, the PRA fined Citigroup’s UK operations £44 million because of failings in its regulatory reporting governance and controls.
Given the financial implications, it’s in your best interests to automate every step of the process—from the collection of source data to aggregation and calculation. This eliminates human error from the equation, enhancing the accuracy of your reports.
3. Create Clear Audit Trails
Data quality has become a central part of the regulatory reporting process. Regulators expect you to provide a clear audit trail that demonstrates the accuracy of the data that underpins your report. This is difficult to achieve if you compile your reports from disparate sources and reconcile them manually.
There are also issues of responsibility—which member of your finance team is responsible for each data set?
An automated platform pulls relevant data from your core banking systems to build accurate, auditable reports with minimal human input. The result is enhanced visibility into your bank’s financial performance and happy auditors.
4. Reinvest in Data Analytics
Prudential regulatory reporting is a straightforward if resource-intensive process. And the more time your finance team spends compiling reports, the less time they have to perform higher-value tasks.
Automation frees them of this burden. Instead of spending hours every day collecting and entering data, your finance team can refocus their efforts on business intelligence and data analytics.
For example, drilling down into your data to uncover new business insights and capture additional opportunities—whether that’s growing the balance sheet or simply monitoring profitability.
It’s about turning your finance team from a cost centre into an exciting value proposition. This is why 40% of finance leaders anticipate increased investment in automation and 51% expect to spend even more on data analytics in the years ahead.
Time to Automate?
Many financial institutions are hesitant to automate their regulatory reporting processes.
Small and mid-sized institutions often feel the cost and potential disruption of implementing the technology outweigh the potential benefits. Especially when they’ve factored in the issue of getting buy-in from their finance team. This is a dangerous line to take.
Automated regulatory reporting software doesn’t have to be expensive or disruptive—if you take an iterative approach to implementation.
The longer you resist the temptation to automate, the greater the pressure on your finance teams to remain compliant in an increasingly strict regulatory environment.
