Managed Services to tackle cost and complexity of Regulatory reporting | Financial Risk | Deloitte

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Managed Services to tackle cost and complexity of Regulatory reporting

Smaller banks are the early adopters of this new trend

Banks are on a journey to redefine their business models. As part of this journey to achieve a sustainable business model, cost effectiveness and efficiency are at top of the mind of decision makers. This is especially true with respect to risk management and compliance cost. It now costs the banking industry nearly € 230 billion annually, or 10 percent of operating cost, to meet the demands of regulatory compliance.

Challenges and developments

In dealing with regulatory change and regulatory reporting requirements, we see a number of challenges and developments:

Top 5 challenges in regulatory reporting and compliance

  1. Critical dependency on key resources: Finding & retaining key resources for regulatory reporting are expensive. Banks would rather like their key resources to focus on improving business outcomes.
  2. Frequent changes in regulations: The scale of regulatory change over the past decade has been extreme. The scale and frequency of changes in the following years is expected to only get worse. More recent examples being AnaCredit, Single Customer View report as part of Deposit Guarantee System Directive, etc.,
  3. Complexity of reporting process: Independent/silo designs result in inefficient manual process steps across formula-based measurement, expert judgement and reporting
  4. Data Inconsistencies: Every team has their own silo of data mart, data model, calculation engines and reporting tools
  5. High & hidden cost: Significant challenge of remaining compliant while reducing costs
Managed Services for regulatory reporting

Managed services for addressing above challenges

Amid this period of heavy investment in risk management and regulatory compliance, some firms are choosing to bridge gaps in internal capabilities and adopt a value-based approach to outsourcing relationships by using managed services. Managed services are strategic, experience-driven, outcome-based relationships with high levels of operational integration and scalability that leverage the specialized skills, processes, and technology of an external service provider.


A potent mix of Managed Service for Regulatory reporting would include:

  1. World class expertise on Regulatory Reporting
  2. Extensive domain experience in banking
  3. Quality Control
  4. State-of-the-art tools and methodologies
  5. Disruptive technologies and innovative ideas
  6. Flexible resources

Managed Services – behind the scenes

With a Managed Service for Regulatory reporting, a bank outsources its reporting operations, while retaining governance of the bottom line and decision making. Managed Services reduces calculation and reporting execution costs. The shared platform creates synergies and economies of scale, with options to scale support up or down as required. The complex and repetitive process steps are delivered via calculation engines leveraging high-capacity IT processing power managed by the provider. The tactical solutions that banks currently have in place are transitioned in to a robust IT solution, across the key process steps:

  • Data ETL and Formulaic Measurement
  • Expert Measurement and Internal Reporting
  • External Reporting 

With a peace of mind, clients can focus their scarce resources on top strategic priorities: core business growth, differentiation, value creation, and profitability.

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Reports most likely to be covered under Managed Services

The focus is on the quantitative reports as specified by EBA, ECB, BIS and select national supervisors. The following reports are the likely candidates: CRD IV reports (FINREP, COREP, Liquidity reports, etc.), AnaCredit, Deposit Guarantee System Directive report, MREL, BIS Quantitative Impact Study (QIS) report.

Key considerations for banks in implementing Managed Services

When initiating an activity that is completely new, such as a new risk management or regulatory compliance process, banks may also benefit from piloting select stages of the process, making course corrections along the way. Some of the key consideration include:

  1. Managing the life cycle of risk: Trusting an experienced provider to handle a critical process.
  2. Piloting, transitioning control, and establishing oversight
  3. Mitigating employee, investor, and regulator concerns

Forging a path forward with Managed Services

Constant changes over the last eight years has left many banks juggling a myriad of growth, operational, regulatory, and technological priorities. Most banks have adopted traditional outsourcing models to delegate business functions predominantly to manage costs. But Managed services take the notion of outsourcing to the next frontier. These outcome-focused, strategic relationships offer banks scalable process expertise. This increases the confidence of banks to reallocate their most critical resources to focus on top strategic priorities: core business growth, differentiation, value creation, and profitability.

More information?

Interested in exploring if and how Managed Services can transform your regulatory reporting? Please contact Peter Schaap, Eelco Schnezler or Venkat Sambandan via their contact details below.

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