Regulatory Reporting Costs Soar Amid Complexity and Inefficiency

Regulatory reporting is a crucial aspect of financial institutions' compliance efforts, but it has become increasingly costly and complex. The Bank of England's 'Future of Finance' report estimated that regulatory reporting costs UK banks between £2bn and £4.5bn annually.

Luke DiRollo, CEO of ALMIS International, highlighted the distinction between statistical and prudential reporting. Statistical reporting provides central banks with macroeconomic and monetary statistics and is a relatively straightforward compliance exercise. However, prudential reporting enables supervisors to assess the safety and soundness of individual institutions and demands deep expertise.

DiRollo noted that prudential reporting is built on four pillars: data capture, data lineage, legal interpretation, and calculation. However, most banks gain little value from these reports, which are often used solely for compliance purposes.

The cost of reporting remains high due to a combination of factors, including the lack of consistency across borders, outdated systems, and an unprecedented level of regulatory change. Regulators moving away from periodic reports to real-time reporting has created more strain on existing reporting systems.