The Model Office Blog

The Future of Regulation

[fa icon="calendar"] Nov 22, 2019 10:34:13 AM / by Chris Davies

The FCA termed RegTech as “…a subset of FinTech that focuses on technology that may facilitate the delivery of regulatory requirements more efficiently and effectively than existing capabilities.” Simply put, RegTech can streamline compliance making it more effective and efficient plus provide tangible benefits such as cost and time savings.

The FCA’s new Director of Innovation Nick Cook made a speech this month stipulating that digital adaptation needs to be at the heart of the regulators strategy given the pace of technology-led change in the markets it regulates.

This means the regulator needs to become agile and focus on outcomes and adapt to remain relevant and fit for purpose. This also aligns with the FCA’s Exec Director of strategy and competition Chris Woodward’s recent speech on the future of regulation, which focused on the current regulatory models resilience to change post 2008 financial crises. Chris Woolard points to three factors that change the context in which the FCA operates:

  1. Completion of the first wave of posit crises regulation
  2. Change in consumer need and attitude for instance low interest rates have driven a search for return and lower tolerance for loss
  3. Innovation has gathered pace

Like Nick Cook, Woolard believes that the FCA is having to change and move away from a narrower compliance with the rules to a focus on delivering outcomes for users of financial services.

With such a focus on outcomes the regulator also needs to factor in what’s coming down the line and shape the inevitable next wave of change.

What are the FCA doing:

There are a number of initiatvies the FCA are involved in:

  • Innovate and Regulatory Sandbox has meant around 700 firms have been through the FCA’s innovation ‘safe harbour’ support and advice unit
  • Digital Regulatory Reporting to deliver a machine-readable rule book
  • Streamlined Gabriel system to make reporting more intuitive
  • TechSprints Hackathons designed for collaboration to solve specific problems e.g. reporting, mental health, Consumer access
  • TechTalks Cross industry dialogue C Suite level
  • Accelerators Incubators target investment and mentoring
  • Trials, Research and Modernisation Natural Language Processing, Chatbots, Analytics, Machine-Learning/AI
  • TechKnow Tech thought leaders educate FCA
  • International Multiple international regulators engaged

How can RegTech help?

What is not changing is the FCA focus on consumer protection, so utilising technology can help market participants due to:

  • Technology integration where application programming interfaces (APIs) can enable tech to ‘talk’ and data share and deliver streamlined regulatory reports across key areas such as:
    • Client data quality
    • AML/KYC/PEP sanctions
    • PROD and Client Segmentation
    • Vulnerable clients are identified and provided the correct services
    • Assessing missing information from client valuations
    • Advice suitability checks identifying underinsured or underinvested clients
    • Assessing adviser supervision and training and competence requirements
    • Ensuring Mortgage practice is compliant with MCOBS
    • Ensuring Insurance practice is complaint with ICOBS
  • Self-Audit and aligning business models with the regulations ensuring firms know they comply and assess and rectify blind spots and weaknesses
  • Increase Management Information and cut time and costs associated with compliance
  • Move from ‘swivel chair’ compliance where disparate solutions (mainly spreadsheets) are used, to a single source SaaS or Cloud based dashboard providing heatmapping, AI algorithms to highlight trends and produce streamlined reports

One message that came through clearly from Cook’s presentation is that both financial services providers and the bodies that regulate them must act to adapt to, and enjoy the benefits of, technology and innovative approaches. This takes courage and a medium-term view so the real benefits that RegTech can deliver more cost and time efficient practice than current strategies.

So, with such benefits in a changing market, the question has to be asked: ‘RegTech, if not now when?’

Please click the below icon link to MO®'s #RegTech platform and learn more about MO® today..

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Topics: Financial regulation, Financial business development, fintech, regtech, Risk management, practice management, FCA, advice, HMT, suitability, FAWG, FAMR, MiFIDII, SMCR, Data, GDPR, Chatbot, Culture, Enforcement, supervision, audit, Conduct, AI, Risk,, Accountability, Platforms, PROD, Product governance, digital,, Regulatory, Reporting, HRD

Chris Davies

Written by Chris Davies

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