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The Bank of England is embarking on a decade-long effort to overhaul the way data is generated and reported across the financial sector.
In a report published, February 23 the BoE outlines how it plans to work with industry and the Financial Conduct Authority to develop common data standards, modernize the way regulators request data from firms and streamline the data collection process.
The effort stems from the Future of finance report, launched under previous governor Mark Carney, which highlighted several areas in which the BoE could make better use of financial technology, including “RegTech” and new methods of gathering data. The BoE commissioned a review of data collection in 2019, in response to the report.
In a statement today, the BoE noted the “strains” that have been placed on the existing data collection process by technological advances and automation, which have led to ever more data being created and captured. At the same time, both regulators and financial market participants have come to expect access to “high quality, timely data” to guide decisions.
But reforming data systems that have built up piecemeal over many years will be no easy task, the central bank acknowledges. Its report, Transforming data collection, states the need for a long-term, incremental approach, to allow flexibility and minimal disruption – what the report refers to as “small fails”.
Firms that commented on the initial data review highlighted the great complexity that goes into current regulatory reporting. One global firm said it was required to submit 40 different reports on liquidity alone in the various jurisdictions it operates in.
The BoE notes that it will be important to work with other jurisdictions on improving reporting, and says it is already involved in several projects. The BoE and FCA plan to establish a team of 10 to 15 people to work on reforming data systems over the course of several years. As many as 12 team members might come from financial firms, the central bank says.
“We will need participants who have expertise and vision to contribute to designing solutions,” the report states. “In addition, to ensure the new changes work for everyone, we would like individuals who are directly involved in the current data collection process to provide feedback on issues and solutions.”
The central bank expects a first phase of work to take place over the next two years, delivering “improvements and lessons for the future”, but only across “a small number of selected use cases”. The following three years will expand the project into new areas, “with an increased focus on integration”. “Subsequent phases” will then scale up the transformation further.
The BoE has highlighted three key areas that require reform. First, it sees the need to develop common data standards “that identify and describe data throughout the financial sector” Second, regulators will need to modernize the instructions they send to firms requesting data, as well as overhauling how these are “interpreted and implemented”. This could include rewriting data requests as code.
Third, the BoE envisages a “more streamlined, efficient approach to data collection”. This reform includes making data collection more consistent across domains, sectors and jurisdictions, and designing each step in the data collection process with the end-to-end process in mind,” it says.
Sam Woods, chief executive of the Prudential Regulation Authority, says: “Having timely and consistent data is vital to our role as a regulator, and to the ability of firms to manage their business. Working jointly with the FCA and industry on the reforms set out in the transformation plan, we are confident that we can start to deliver valuable change and set the stage for a larger transformation over the next decade.
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