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concerns about the reliability of regulatory reporting submissions

Updated: Dec 7, 2021

Introduction


The PRA raised concerns regarding the reliability of regulatory reporting submissions in their Dear CEO letter of the 10 September 2021. The regulator is very concerned about the overall standards of governance, controls, data quality and the overall investment by firms in their capabilities as they pertain to regulatory and supervisory reporting.



Governance and Ownership


The PRA expressed disappointment at the lack of clear governance and ownership of the regulatory reporting process in its latest findings. Senior managers are required to have effective oversight of their end-to-end processes as they relate to regulatory reporting. The regulator found that responsibilities were often dispersed across multiple teams and delegated too far down the organisation.



Overall, the PRA found instances where the preparation of regulatory reporting lacked the required care and rigour expected. They reiterated that the oversight of regulatory reporting needs to be at the equivalent level of oversight as financial reporting


Controls


The PRA also expressed concerns around firms control infrastructure. They found serious shortcomings regarding model controls, spreadsheet oversight and the reconciliation process.



Some of the shortcomings included errors and a lack of rigour concerning reconciliations, no or insufficient record keeping around model documentation and ineffective model change processes.


Firms are being required to ensure all processes are supported by full and complete documentation and a robust review framework that demonstrates that their reporting is consistent, accurate and appropriate.

Data and Investment


The regulator highlighted that many firms had not prioritised investment in regulatory reporting and hence had reduced its capacity relative to financial reporting. The practise of implementing a series of tactical changes rather than taking a longer-term strategic outlook has taken its toll. Firms need to place a greater focus on robust sourcing data as well as processing and reporting of regulatory information.



Our Experience


HKB Risk Consulting are experts in regulation, risk and financial reporting for financial institutions. We have years of experience helping clients design, change and implement effective reporting solutions. We have a lot to offer regarding all the points raised in this letter. We are interested in opening a conversation and sharing our industry insights. Would you be free for a call during this month? Click Here, To Get In Touch With Us - Looking forward hearing from you.


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