Regulatory compliance is a very real concern for financial institutions and other companies within this industry. Subject to some of the world’s most stringent oversight, business leaders in the financial sector must navigate a complex regulatory landscape with numerous requirements for achieving compliance. What’s more, companies that operate within this business space rely upon trust and positive reputation, with consumers veering away from financial institutions with any form of ill repute.
Non-compliance can spell serious trouble for a bank or financial services provider and its ability to remain profitable. Monetary fines are just one potential penalty. Remediation measures may be ordered. There’s even the possibility of jail time in some cases.
Reporting is one area that commonly trips up businesses in their attempts at achieving compliance, leading to some potentially devastating consequences. Audits and reports are commonly required by regulatory bodies and industry organizations, especially those that endorse financial institutions. So what are the regulatory reporting requirements for banks and financial institutions? What do these reports entail? And what systems or technology do you need to have in place in order to achieve full compliance with these reports?
The Purpose of Regulatory Reporting for Financial Institutions
Regulatory reporting is mandated across many industries, but few have the significant reporting requirements that you see in the financial sector. Regulatory reports serve a couple different purposes. The first function relates to accountability. By requiring quarterly or annual reports, a regulatory body or agency can effectively monitor a financial institution and its practices. The reporting requirement can also serve as a deterrent for those who are considering unethical or improper business practices.
In fact, there was relatively little by way of accountability within the financial space until the early 2000s. Around this time, the U.S. saw a handful of high-profile banking scandals. It was subsequently determined that there was a void in the realm of accountability and oversight, prompting changes that included the passage of the 2002 Sarbanes-Oxley Act. Better known as SOX, this law applies to publicly-held corporations which are required to submit annual audits and reports that detail their financials. These audits and reports are designed to promote a sense of transparency and accountability within the financial sector and beyond. SOX is also significant because it is one of the few regulatory requirements that can lead to jail time as one of the penalties for non-compliance.
What’s Contained in Regulatory Reports for Financial Institutions?
Regulatory reports take many different forms and the exact nature of each report varies according to the regulatory body or agency that’s involved. The frequency of these reports also varies, although quarterly or annual report requirements tend to be the most common.
Generally speaking, these reports contain data that provides an overview of a financial institution’s business dealings over a set period of time. The goal is to demonstrate that the bank is compliant with the regulatory requirements. Regulatory reports typically include the following components.
- Record-keeping requirements abound, and financial institutions must prove that they are maintaining proper records for transactions and business processes.
- Data management and security measures must be detailed and maintained to protect sensitive financial data and sensitive information that is provided to the bank by consumers.
- Proper policies, processes and procedures must be demonstrated, including documentation of terms and conditions, retaining signed documents, and so on.
- Formal complaints must be documented, along with information on how each complaint was handled by the financial institution.
- Training and employee onboarding operations must be detailed so the regulator is satisfied that employees are prepared to do business in a manner that is fully compliant.
These are some of the key points that must be touched upon in a financial institution’s regulatory reports. Auditing tools are really essential for proving compliance in many instances. This underscores the importance of having the right technology in place as an organization strives to meet the set regulatory requirements.
Simply requiring these reports goes a long way toward improving accountability within the financial sector. The reporting requirements are also effective in prompting financial institutions to implement best practices because these measures are typically what is required in order to achieve and maintain regulatory compliance.
Regulatory Compliance Software and Its Role in Reporting
Regulatory reporting can be rather complex since you must perform comprehensive audits and pull from a variety of data sources in order to compile the report. A company must have very specific data configurations in place, otherwise, they may find that they lack the data they need to fulfill their reporting requirements. For example, improper data retention settings could lead to devastating data loss. Improper data sync settings could result in fragmented data sets and inaccurate reporting. A faulty integration may cause problematic data omissions. Some systems may even lack the data auditing capabilities that are essential for achieving compliance through the submission of regulatory reports.
Regulatory compliance software can help a financial institution in their efforts to meet their auditing and reporting requirements in an efficient and streamlined manner. These software systems can be integrated with a company’s ERP, CRMs, and other enterprise software systems, pulling data from a variety of sources. Integrations allow data to flow into a platform where users perform audits and compile reports. Many regulatory compliance software platforms also include templates and guides that can be used as a starting point for users who lack experience compiling these mandated reports.
A financial regulatory compliance software system can be a very useful tool for companies that are seeking to achieve and maintain regulatory compliance. At iTech, regulatory compliance software is just one of our specialties. We work with clients in the financial space and beyond as we collaborate to gain a full understanding of their regulatory compliance challenges and their reporting requirements. Then, our innovators architect a software solution that will drive regulatory compliance. Reach out to the team at iTech today and let’s discuss your financial institution’s regulatory reporting challenges.