Two of the UK’s most influential authorities are looking to change how data is handled. MirrorWeb has written an article explaining what changes financial services firms can expect.
The Financial Conduct Authority (FCA) and the Bank of England revealed their plans to enhance their data and analytics capabilities to boost monitoring of the UK’s financial sector in the beginning of January 2020.
Looking through the FCA’s and the Bank of England’s 56-page long discussion paper, MirrorWeb identified three potential changes to come out of the new strategy.
Firstly, MirrorWeb noticed that the two regulators have a huge problem with heterogenous data, meaning the vast number of ways firms collect and report data. These variations, MirrorWeb explained, made it difficult for the authorities to “write a set of reporting instructions that are clear and unambiguous for all firms.”
One potential solution would be to enable authorities to pull data directly from firms. This would enable the Bank of England to create reports on demand. Similar systems are already in place in Rwanda and Austria.
However, the authorities noted that systems like that would add more cybersecurity risks. MirrorWeb explained that considerable investments would be needed to develop a reliable tech solution for this system to work.
Secondly, MirrorWeb noted that the Bank of England is exploring the use of “natural language processing (NLP) of less processed and unstructured data from firms, called management information (MI).” The RegTech company believed a system like that could empower improved analytics. For instance, it could compare “the extent to which boards of different firms are concerned about the same issues and [identify] inconsistencies between firms’ regulatory reporting, MI and published accounts.”
Promising as this might be, MirrorWeb believed the technology was not yet ready to substitute the current way of collecting data. Although, the RegTech firm noted that it could supplement it.
Thirdly, the FCA and the Bank of England were “evaluating is how they draft instructions and guidance in an unambiguous format, translating this from natural language,” MirrorWeb wrote. It stated that the authorities are current seeking legal advice on how they can provide precise instructions “for how data is handled and submitted”.
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