Regulatory technology services: Regnology

Global finance is moving towards 24/7 transactions and economies. But, as supervisors proceed towards collecting more granular and regular data from thousands of financial institutions, they must deal with many times more communications around regulatory filings. Regnology’s new ‘Rconnect’ software helps to address this correspondence challenge by creating a case management system that allows central bankers and supervisors to see the stream of messages around submissions in one place. It also creates a central repository from which to unleash the potential of artificial intelligence (AI). 

Regnology, formed in 2022 from the merger of BearingPoint RegTech and Vizor Software, serves 35,000 financial institutions and 60 regulators, international organisations and tax authorities worldwide. 

The genesis for Rconnect came from conversations with supervisors about their need to move away from older and more manual ways of communication. “When talking to our regulator customers about how they communicate with the industry, we realised they are almost all communicating with the industry via email and processing queries in a very manual way,” Joanne Horgan, suptech product director at Regnology, tells Central Banking.

One European central bank, for example, gets more than 1,000 queries into its inbox per month, and must manually respond and track each query, “which is very labour intensive”, says Horgan. Regulated entities, too, are burdened with manual processes. 

On the regulated entity side, Regnology heard from banks that they were getting hundreds of queries from the regulator, again via email, often with spreadsheets and document attachments. Financial institutions have the additional complexity in responding where they must “deal with multiple regulators, multiple technologies and multiple workflows”, Horgan’s colleague, Alexander Becht, says. 

Having previously worked for the Deutsche Bundesbank as a statistical supervisor, Becht has seen the scale of the challenge from the perspective of the public and private sector and is now senior product manager at Regnology. There was a one-too-many connectivity problem for both sides. However, Rconnect reduces the risks associated with misinterpreted regulations. 

The Finnish Financial Supervisory Authority (FIN-FSA) which oversees around 2,500 entities, is completing its reporting system reform with Regnology, in which an earlier version of the Rconnect module is live and has been implemented.

The reporting system reform at FIN-FSA covers European Banking Authority implementing technical standards (ITS) starting in July 2022; European Insurance and Occupational Pensions Authority ITS, starting in the fourth quarter of 2022; and European Securities and Markets Authority; and national (Virati) data collections, both starting in 2023. “We had a really demanding and, I have to say, ambitious schedule,” Kimmo Kauhanen, head of supervision technologies at FIN-FSA, says of reforming its reporting system within two years.

This reform coincided with a new national law requiring that exchanges between citizens and public institutions be carried out securely. All reporting-related interactions between FIN-FSA’s regulatory experts and regulated entities go through Regnology’s e-Regulatory system with real-time discussion threads, notices and bulletins replacing traditional emails and even calls.

FIN-FSA was the first customer to require firms to use the secure communication channel in Regnology’s suptech platform rather than communicate over email, says Horgan.

“Instead of sending separate emails to our reporting entities, we have discussions that are in the context of that particular report in the tool,” Kauhanen tells Central Banking. “That is to me a big, big improvement.” 

Regnology’s e-Regulatory services ensures identification of filers, management of reporting entities, calculation of their regulatory obligations, automated (application to application,) or manual (load files, web forms) collection of reports, validation and transmission to authorities, and dissemination of collected data to FIN-FSA’s data warehouse. 

Kauhanen says the data validation service used before entities make their final submissions has helped to reduce the burden of checks and communication volume. FIN-FSA also modernised its data warehouse integration layer for more cost-efficient maintenance when data collections are updated or new data collections added. 

The user interface – the point of human-computer interaction and communication in a device – and user experience is very important for the FIN-FSA and an area it has sought to improve. The “communication module” now live in the tool is a “concrete example” of this streamlining and efficiency, adds Kauhanen. Another benefit Kauhanen says is that the supervisor now has certainty the message has reached the recipient. 

Before, FIN-FSA had an in-house regulatory reporting solution but found it problematic, because over time it required staff to have multiple competencies within FIN-FSA. The Finnish supervisor sought a private sector platform that could also take responsibility for implementing future changes to reporting, says Kauhanen. 

Here the future potential for AI comes in. Rconnect works with automated submission and feedback loops. The repository of messages creates a training dataset for automated messages. This, combined with automated workflow operations, means the regulatory and supervisory process becomes less dependent on staff in the central bank manually setting reminders to make decisions, compose messages or initiate and carry out actions. 

Communication flowing through Rconnect automatically creates a workflow, for example showing whether a submission is pending, failed or delayed, and the appropriate next steps. “It’s an offering to both sides of the market, but with a strong focus on the regulator to organise the work, to streamline it,” Becht says. 

Other central banks are currently investigating the pros and cons of Rconnect, with the most recent version of the service offering advanced features that allow supervisors to use the software even if they do not use Regnology’s data collecting technology. 

The Central Banking Awards 2024 were written by Christopher Jeffery, Daniel Hinge, Dan Hardie, Joasia Popowicz, Ben Margulies, Riley Steward, Jimmy Choi and Blake Evans-Pritchard.