A comprehensive analysis of the regulatory reporting regime of credit institutions

Abstract

Through their off-site supervision, regulators require a number of regulatory reports from credit institutions. These reports would contain detailed breakdowns and analyses of the credit institutions’ financial position and performance, capital adequacy and liquidity management amongst others. The main purposes of this requirement are to enable the regulators to identify any threats to the safety and soundness of the economy, to ensure compliance with the legal framework and to maintain public confidence. Over the years, regulators across the globe have strengthened the reporting required from credit institutions. However, this has become burdensome and increased costs for credit institutions and regulators. Credit institutions have had to adapt their systems and processes to the changes imposed by regulators to ensure that they remain compliant. Arguably, it has been debated whether the benefits of regulatory reporting outweigh the costs that are incurred to complete and submit data. Investments in new IT systems and human resources are a constant struggle for credit institutions and regulators to be able to reduce costs of such reporting requirements in the longterm. Processes and procedures within credit institutions need to be managed and controlled to ensure that the quality of data submitted is maintained while enhancing them to be as efficient as possible. Regulators face similar issues, mainly the lack of knowledgeable people required to interpret the regulations, ensure that the regulated credit institutions are in compliance and are constantly being monitored. Regulators are increasingly expected to carry out an effective cost-benefit analysis before introducing new regulations and to revise current reporting to eliminate duplicate reporting or outdated information. Proposals on new systems of collecting data are being debated to lower the burden and limit the effect of regulatory reporting on the credit institutions’ competitiveness and profitability.