A detailed look at the future of data standards for regulatory reporting

Introduction

In "The Box: How the Shipping Container Made the World Smaller and the World Economy Bigger," author Marc Levinson explores how a seemingly simple innovation - the shipping container - revolutionized global trade and transformed the world economy. By standardizing the way goods were packed, shipped, and handled, this unassuming metal box unleashed unparalleled efficiency, cost savings, and widespread economic growth. Today, a new revolution is underway - one that is poised to make a similar impact on the financial world. As regulators seek greater transparency and accountability in reporting, data standardization emerges as the key to unlocking the transformative potential of regulatory reporting. Just as the shipping container brought order and efficiency to a chaotic industry, data standardization has the power to streamline and revolutionize the way financial information is collected, analysed, and shared. Indeed, the last few years have seen an exponential growth in the amount and variety of data for regulatory purposes created by financial institutions. Without a coherent structure of data in corporate repositories, a lot of time and resources are lost cleaning and interpreting that data instead of using it. Hundreds of thousands of data points must be reported in an increasingly complex regulatory reporting system. It is now clear that supervisors and the industry are re-thinking the reporting model in light of increasing compliance requirements. This is evidenced by the numerous data standardisation initiatives underway (cf. Annexe). Furthermore, our research into the intricacies of Push vs Pull highlighted the pre-requisite of a granular data standard. But data standardisation is a vague term, and a clear description of the objective is important. Data can come at many levels of granularity, and data models can come at many levels of abstraction for many different use cases. A data standard is merely an agreed format to exchange information such that there is as little ambiguity as possible in interpreting received data. It should also be clarified that open standards do not mean open data.

Given the large-scale systems of financial institutions, and increasing need for interoperability, standardisation can have wide ranging benefits. Particularly in the regulatory data space where comparability is a key criterion. In this paper, we will attempt to present data standards at each level of the regulatory reporting process and a general blueprint for successful data standardisation, gathered from the expert advice and experience of data standards leaders in the financial and other sectors - hopefully overcoming the confusion caused by the many layers of data, transformations and processing systems involved.