The article is a summary of key discussion points from the webinar Mastering Regulatory Tsunamis: Automating Compliance and Data Management in Banking with Sidhartha Dash, Chief Researcher, Chartis Research; Jeroen Van Doorsselaere, VP Product and Platform Management and Joost Roelin, Director Product Management at Wolters Kluwer Finance, Risk and Regulatory Reporting.
The world of banking is undergoing significant shifts, with new regulations, technologies, and market forces reshaping how financial institutions operate. Here, we explore six key themes driving these changes: Basel reforms, granular data reporting and data management, resolution planning, environmental, social, and governance (ESG) issues, the re-emergence of asset-liability management (ALM), and the growing role of artificial intelligence (AI). Together, these themes are creating both challenges and opportunities for banks as they adapt to a rapidly evolving environment.
1. Basel Reforms: managing regulatory complexities
The Basel Reforms have become a critical part of global banking regulations. However, implementing these reforms isn’t straightforward. Different regions are moving at different speeds— E.g. Europe and Australia have embraced them ahead of the U.S. For banks operating globally, this creates headaches, as they have to juggle different rules in different markets.
A key trend is the expectation of "continuous compliance." Regulators now want banks to be compliant all the time, not just when they submit reports. This has forced banks to rethink how they integrate regulatory requirements into their daily operations. Instead of treating compliance as a separate task, it’s now closely tied to risk management, making it a constant part of decision-making.
These changes come at a cost. Maintaining compliance is expensive and can reduce profitability, especially as banks face growing competition from non-regulated financial players. However, advancements in technology, particularly AI, are helping banks manage the increased complexity by improving how they handle data and reporting requirements.
2. Granular data reporting: meeting new regulatory demands
After the 2008 financial crisis, regulations have become more data-driven. Banks are now required to report detailed, real-time data, a demand that’s only growing. Regulations like Basel III require banks to manage more granular data, and the focus is on handling this data efficiently from the moment it’s collected to when it’s reported.
This has created a need for cross-departmental collaboration. Risk, compliance, and finance teams must work together to ensure consistency, especially when it comes to contractual and cash flow data. Breaking down data silos is essential, and banks are adopting technologies like Kafka and modular data models to ensure smoother data processing and compliance.
However, managing data goes beyond just collecting it. Banks must maintain clear data lineage—tracking where data comes from and how it’s transformed—to ensure transparency and avoid mistakes that could lead to costly penalties.
3. Resolution Planning: preparing for future crises
The importance of resolution planning—how banks prepare for financial crises—has been magnified by recent events, such as the issues faced by Credit Suisse and UBS. Regulators are now putting more pressure on banks to develop strong resolution plans, which will become a major focus in 2025. Banks are expected to conduct regular stress tests to ensure they can handle extreme financial events.
This is complicated by the fact that resolution planning is not the same across different regions. Banks with global operations face a complex landscape of rules, as countries interpret global standards differently. This regulatory divergence can force banks to rethink their business models to ensure they are compliant wherever they operate.
Ultimately, resolution planning is about being prepared for the unexpected. Banks need to be proactive in managing risks, with a focus on ensuring they can continue to operate during a crisis.
4. ESG: still a priority
Environmental, social, and governance (ESG) factors are becoming a permanent fixture in the financial industry, even though political changes in some regions have led to variations in how these issues are regulated. While some countries have strict ESG rules, others are taking a more flexible approach. Europe, for example, has introduced broad reporting requirements under the Corporate Sustainability Reporting Directive (CSRD).
ESG goes beyond environmental concerns—though climate change risks are front and center. Social and governance issues, such as public protests and corporate governance frameworks, are increasingly influencing how banks manage their risks. Financial institutions are integrating ESG considerations into their risk reporting, ensuring they are prepared for both long-term trends and short-term crises.
The challenge for banks is to balance immediate action with long-term planning. For example, banks can use climate data like flood maps to assess risk in the short term, but they must also be ready to respond to unexpected crises that could emerge at any moment.
5. The re-emergence of Asset Liability Management (ALM)
While ALM—the management of a bank’s assets and liabilities—has always been essential, it has re-emerged as a key focus due to volatile interest rates and widening macroeconomic differences between regions. Banks must now forecast financial risks more carefully and align their balance sheet strategies with these new realities.
Recent crises, such as the collapse of Silicon Valley Bank, have highlighted the need for banks to better understand the behavior of their depositors and counterparties. ALM departments are focusing on more sophisticated behavioral models to predict how depositors and other stakeholders will react in times of stress.
This renewed focus on ALM also reflects the need for banks to harmonize financial and regulatory risk management. Different departments within the bank—such as treasury, compliance, and risk—often work with the same metrics, but approach them differently. By aligning these functions, banks can improve both their routine operations and their ability to respond quickly to crises.
6. The growing role of AI in banking
Artificial intelligence is transforming the way banks operate. AI technologies, including advanced models like generative AI, are helping financial institutions manage large amounts of unstructured data—such as documents and regulatory reports—more efficiently. This ability to process and analyze text is particularly valuable as banks work to meet complex data and reporting requirements.
AI also offers opportunities for process optimization. Banks that use AI to automate and enhance compliance, risk management, and data reporting can improve efficiency and accuracy. However, the adoption of AI comes with the need for robust governance frameworks to ensure transparency and compliance.
As AI becomes more integrated into banking, it is also driving advancements in data infrastructure. Technologies like vector databases and new cloud architectures are becoming essential to support AI applications, helping banks redesign their data management systems to meet the challenges of the future.
The financial sector is at a turning point, with new regulations, technologies, and market forces driving significant change. The key to success will be the ability to adapt quickly and integrate these developments into their core operations. Our award-winning regulatory reporting and financial risk solutions can help you traverse these regulatory tsunamis.
