SWIFT/Deloitte white paper says there’s an opportunity to use coming regulations to improve efficiency, boost profits.
Could banks benefit from the new regulations they’ve been grousing so much about? New rules requiring banks to hold more liquidity and manage data more efficiently could actually save them money and increase profitability. That’s the verdict of a recent report from financial messaging service SWIFT and Deloitte.
According to the report, regulators are taking a data-driven and more invasive approach to monitoring in order to help improve banks’ resilience and transparency of operations. This will require financial institutions to make significant upgrades to their data management systems. One change expected to be endorsed at the G20 summit in June stipulates that all parties involved in a financial transaction use a common identifier, so regulators can better monitor system risk.
If taken as a strategic opportunity, such upgrades could reduce operating costs, improve risk management and release capital, in addition to bringing banks into compliance, according to SWIFT and Deloitte. For example, under Basel, improved data management would help prevent banks from misclassifying underlying assets; then instead of retaining extra capital on their balance sheets, they could use this capital to generate more profitable business.
“Improved data management could enable banks to release £17bn ($27bn) of regulatory capital and improve profitability,” the paper concludes.
Regardless of the new regulations, improvements to data management are needed to stay competitive. “Change is coming quickly to the data industry,” said Patrik Neutjens, head of reference data for SWIFT. “To stay competitive and in compliance with new market requirements, financial institutions need to embrace a more strategic, enterprise-wide approach to data management.”