Reporting to regulators documents information about how a banking business works and what it does. It includes both internal checks and reports from the outside. The goal of reporting is to ensure that people who need access must have it and that all parts of a business follow the law and best practices. Banks must ensure it follows legal reporting rules to determine which laws and regulations apply to them. Then, it must be known that everything is being done to meet those needs.
Why is Regulatory Reporting critical?
Regulatory reports are a way to ensure that banks follow all the rules set up. But compliance isn’t just about following the law, and it shouldn’t be seen that way. It also involves ethical standards and social duty.
Every part of a bank should follow the rules: workers, contractors, suppliers, and customers. Banks should also ensure that no law or regulation is broken, even if done by accident. To be in line, rules must have clear steps that help banks find risks. They should also explain how these risks will be reduced and how controls will be put in place to ensure they will continue declining.
Partnering with domain experts in Regulatory Tech offerings like Maveric Systems empowers leading FIs with cutting-edge know-how and future-ready execution.
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Four Essential Risks Associated with Regulatory Reporting.
- Operational Risks: Operational risk is the risk to present and future financial performance that comes from processes, people, technology, or systems that don’t work well or don’t work at all. It includes risks like lousy quality control, employee mistakes, theft, fraud, data loss, hacking, natural disasters, and problems with following the rules.
- Compliance Risks: Compliance risk is the risk of breaking laws and rules and not following the standards, policies, and processes set.
- Strategic Risks: Strategic risk happens when a bank makes bad decisions, doesn’t do an excellent job putting those decisions into action, or doesn’t have the flexibility to adapt to changes in the banking industry. When regulatory reporting is done wrong or needs to be done at all, a bank’s strategic risk may increase because the management will be using inaccurate information to monitor the bank’s general performance and health.
- Reputational Risks: Lastly, image risk has to do with how the public sees the bank’s finances and how that affects the bank’s ability to stay in business. If the bank’s image were hurt, it would negatively impact relationships, services, and customers. This could damage the bank’s ability to compete. It may also be hard to keep the trust of customers and other essential people since it shows that the processes are implemented to prevent data breaches and other problems that are not working and need to be fixed.
Banks like Goldman Sachs, Wells Fargo, and JP Morgan Chase have paid over $7.5 billion in fines for not following rules. This shows that even the most prominent players always have to deal with risks and regulations. Regulators like FDIC, FRB and CFPB, and the Office of the Comptrollers (OCC) constantly check banks for compliance with risk management policies. In a few cases, they’ve taken steps to ensure they follow the rules because of an underlying weakness that turned into an uncertain situation, practice, or violation of the laws.
About Maveric Systems
Starting in 2000, Maveric Systems is a niche, domain-led Banking Tech specialist partnering with global banks to solve business challenges through emerging technology. 3000+ tech experts use proven frameworks to empower our customers to navigate a rapidly changing environment, enabling sharper definitions of their goals and measures to achieve them.
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