The global banking sector is increasingly focusing on technologically advanced solutions like blockchain to satisfy consumer needs, while preparing for future challenges in terms of cost-effectiveness.

In this environment, supervisory authorities remain crucial to allow for innovation in the regulated financial industry and therefore, they are challenged by the opportunities of new technologies. Besides high cost of current regulatory regimes due to data quality problems and inefficiencies, digitalization increases technological as well as societal pressure to modernize banking supervision and regulatory reporting. Moreover, the steadily increasing number of regulatory duties strengthens the need to accelerate the adoption of new technologies such as distributed ledger technologies (DLT).

Our financial authority DLT readiness assessment

To support regulating authorities and central banks in assessing their DLT readiness, we offer consulting services in the area of governance, business implications and technology. We established a team of technology and business experts in order to support you in setting up beneficial ways of implementing blockchain or distributed ledger solutions for regulatory reporting. Download our service offering "Financial supervisors and central banks as a part of blockchains?"

Our team of Corda certified consultants and developers can help you approach your regulatory reporting activities powered by blockchain and smart contracts for innovative solutions and process optimization. With our successfully implemented Proof-of-Concept we prooved our proficiency and expertise in DLT technologies for regulatory reporting.

Profound knowledge in banking regulation combined with blockchain expertise

Areas of Consulting Services

Governance

Asking whether regulatory authorities should actively participate in DLT networks shows the two angles for a potential governance framework. In general, we consider a regulator’s involvement to be either active & innovation-driving or passive & innovation-perceptive. Elaborating on different scenarios how to interact with DLT networks of commercial banks and being aligned about the regulator’s role, is one target of the governance task force.

Business

Irrespective of whether they are active or passive, authorities should examine the organizational and procedural benefits of DLT adoption. In-depth analyses of different reporting processes and the identification of respective efficiency gains are first approaches to determine cost reductions and supervision quality enhancements. The second task force therefore identifies regulatory reporting use cases and innovation focus areas for financial authorities.

Technology

Even though there is a consensus among all the decision makers, that DLT networks sufficiently matter for regulators, an analysis of the prevailing IT architecture & potential DLT entry points will be mandatory. In order to facilitate a smooth transition to DLT-based reporting solutions, this task force could also include a study on future data handling between financial institutions and the respective regulators.

Today, the regulatory system is not meeting requirements of new technologies and business models. Existing high financing costs can discourage new market entrants.

We have been developing a concept for a blockchain/DLT-based regulatory regime, which may offer the opportunity to improve micro and macro supervision, to reduce costs and to facilitate the entry of new companies.

 

Moritz Plenk, Head of RegTech DLT

Major Challenges for the Financial Regulation & Supervision Landscape

In 2019, the European regulatory sphere is accelerating its activities to clarify approaches regarding AI, blockchain and robotics. Both on national and on European level there are announcements about studies and prototype developments, almost daily.

As BearingPoint we are facing three trends in banking regulation that can be tackled with either one or a combination of the mentioned technologies:

  • High Data Granularity

    Data processing supported by new standardized tools such as Smart Contracts will enable enriched reporting information.

  • Increased Data Quality

    We will observe less effort for data reconciliation, because of increased integrity and new interfaces to core systems.

  • Regulatory Live Data

    BearingPoint expects live data for regulators to be available in the future. This will open up possibilities for pro-active monitoring and enhanced activity supervision of financial markets.

Especially within the DLT area, several trends will lead to new steering opportunities for European regulators. Our concept embeds regulatory content in smart contracts thus automating regulatory reporting. BearingPoint encourages authorities to engage in preparative strategies on how to deal with these new technological options. We have shown in a  Proof-of-Concept that this is already possible in the current regime of transaction reporting for ESMA.

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Blockchain in RegTech. A proof of concept for regulatory reporting with distributed ledger technology.

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Financial supervisors and central banks as a part of blockchains?

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