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The PRA remains concerned over the quality of regulatory reporting following the findings of a series of recent S.166 reviews.
The PRA on Friday (10 September) issued a further Dear CEO letter in relation to regulatory reporting. The previous letter issued in October 2019 set out the PRA’s expectations for regulatory reporting, including the requirement for firms to demonstrate their adherence to standards, which was followed by a series of S.166 reviews.
The latest letter reflects on the findings of those reviews and it is clear that the PRA remains concerned with progress in the areas outlined in its original letter. The tone expresses growing frustration that the industry is not meeting the standards expected of it, with a concluding reminder that, where a firm falls short of its expectations, the PRA will consider the full range of supervisory responses and enforcement powers at its disposal.
The PRA has stated on more than one occasion that it expects firms to exercise the same rigour in their regulatory reporting as they apply to their financial reporting. The industry has often found this challenging, owing to growing complexity of rules, changes in their business and the need for greater investment. However, the PRA is clear that it is not willing to compromise, and that all firms need to achieve this level of quality within their regulatory reporting framework.
Overall, we were disappointed to find significant deficiencies in a number of firms’ processes used to deliver accurate and reliable regulatory returns. It was clear that multiple firms did not treat the preparation of their regulatory returns with the same care and diligence that they apply to financial reporting shared with the market and counterparties… …We expect all firms to submit reliable and accurate regulatory returns and for the regulatory reporting process to receive no less rigour than financial reporting.
Many firms across the industry, including many of the largest banks, have implemented significant enhancement or remediation programs to further improve their regulatory reporting frameworks. However, based on the the PRA’s feedback from S.166 reviews commissioned to date, it is clear that there is still work to do in this area. The key thematic findings include:
The PRA letter is clear that firms have not made sufficient progress in improving their governance and control frameworks for regulatory reporting, and that where the PRA has concerns over the quality of reporting it will not hesitate to take action. It concludes:
…we will continue to use a range of available options including further skilled person reviews. We would also note that, where individual firms fall short of our expectations, we will consider the full range of supervisory responses and enforcement powers at our disposal.
Firms that have been the subject of S.166 reviews should have clearly articulated, resourced and funded plans to remediate any findings.
Firms that have not had S.166 reviews should carefully review the letter and assess their regulatory reporting processes to ensure that their infrastructure, controls and governance meet PRA expectations. If there are gaps, plans should be put in place to address any shortcomings in short order in expectation that a S.166 may arise.
Our Regulatory Reporting experts have a wealth of experience working with a range of financial institutions to review capital, leverage, liquidity and other core regulatory requirements to help strengthen the end to end framework for regulatory reporting.
We offer a range of scopes for assurance review, which can be tailored according to individual requirements, benchmarking against the ICAEW framework (TECH 03/17/FSF) and our target operating model for best in class regulatory reporting.
Our team also includes individuals who have worked for regulators, in regulatory reporting and financial control functions and in the business, with the ability to leverage strong data analytics capabilities.
Tom leads Deloitte's Risk and Capital Management team in London. He has over 20 years experience working and leading major Risk, Finance and Treasury transformation programs at Tier 1 UK and global financial institutions. Tom has significant experience in the design and implementation of Basel programs, across both capital and liquidity topics. He has also supported major institutions to define and implement supporting systems for risk and finance reporting. Prior to leading Deloitte's UK Risk and Capital practice he set up and managed Deloitte Risk and Regulation Advisory practice in Switzerland.
Andrew is a chartered accountant with over 20 years experience in assurance and advisory services for FS clients. He co-leads our cross-service line Regulatory Reporting Assurance proposition, helping our B&CM clients with enhanced assurance over capital, liquidity and other core regulatory requirements, as well as leading our regulatory specialist support for external audit clients in the sector. Andrew has an extensive practical knowledge of the UK PRA and FCA regulatory framework, regulatory reporting requirements and supervisory approach.