Where regulatory supervision meets big data
As regulators across financial services continue to develop capability in big data, machine learning and predictive analytics to bolster surveillance and enforcement activity, there is a distinct contrast between organisations who have invested in a journey of growth, and those who have not started the journey soon enough.
Regulators are building capability in big data, machine learning and predictive analytics.
Intelligence is at the heart of every regulatory toolkit. Regulators are on a journey to modernise methods of bringing together sector intelligence that produces sophisticated insights into consumer harm, regulatory failure and meet contemporary expectations of regulatory performance.
Across financial services, we are seeing regulators prioritise the development of internal capabilities in big data, machine learning and predictive analytics, signalling data sets they have or will soon commence collecting on demand.
Financial services organisations have faced regulators’ compulsory information-gathering powers before. However, this process has historically allowed for (careful and often legal) human extraction and review. Until now, there has been limited opportunity for regulators to overlay information provided under specific enquiry to a universe of regulatory intelligence.
The Financial Regulatory Assessment Authority (FRAA) will soon be undertaking its first review into the capability and effectiveness of both the Australian Securities and Investments Commission (ASIC) and The Australian Prudential Regulation Authority (APRA). A key focus of the FRAA will be to consider regulatory surveillance capability, including the use of data and technology to effectively and efficiently deliver on regulatory mandate. Whilst it is clear that regulators have committed to enhancing their data and technology capabilities, there are also some indicators of how far along this journey they are.
ASIC has signalled to industry they are currently exploring mandatory recurrent data collection in relation to mortgages and managed funds flow to detect emerging risk. ASIC is also piloting new internal dispute resolution (IDR) reporting documents in response to the upcoming implementation of Government’s mandatory IDR reporting framework. Organisations need to have in place adequate complaints processes that not only comply with regulatory obligations but deliver on the regulatory intent of understanding complaint data and facilitating appropriate customer outcomes. This can only be achieved by leveraging organisational intelligence to identify and manage risk.
APRA has commenced retrieving select data on demand through their portal for reporting entities which is used for prudential supervision, statistical publications and shared with partner agencies. The data allows APRA to industry benchmark as well as understand an organisation’s financial position, key financial performance metrics, fees and expenses. The APRA portal continues to be enhanced.
Key questions for your executive
- Who is responsible for the development of ongoing monitoring capability in your organisation? Do organisational stakeholders include leaders in Customer, Risk and Data?
- Is your regulatory spend resulting in a deeper understanding of your organisation, its customers and driving commercial outcomes?
- Is your organisation starting the journey, or still sitting on the start line?
Want to know more
Deloitte runs client information sessions regularly on the changing regulatory environment and brings peer groups together to share insights and emerging practice. In April, we will be running sessions across the financial services sector in relation to emerging practices and issues post implementation of the breach reporting reforms which commenced in October 2021.
If you would like to attend one of those sessions, please contact us through our details below.
