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Majority of financial institutions unprepared to accommodate further regulatory change, data reveals

A new report from AutoRek, a fintech setting the new standard in financial data automation, has revealed that the majority of banking institutions feel they are poorly equipped to accommodate any further regulatory change from an internal processes perspective.

Of the 500 banks surveyed across the US and UK, the vast majority (71%) agree that their financial control processes are not robust or flexible enough to accommodate more regulatory change or scrutiny. The findings come at a challenging time for financial institutions, with several significant regulatory changes due to be implemented over the coming months, not least EMIR Refit and revisions to MiFID II.

Aside from the issues firms have reported around their financial control processes, institutions also have significant worries around their data quality, particularly with regards to meeting regulatory reporting requirements. A considerable 70% of respondents agree that their data lacks the transparency and flexibility to be used for regulatory reporting. In addition, 73% of firms struggle to receive all the data they require to complete internal and external audits – a concerning revelation given auditing season is fast approaching.

Despite the perceived lack of flexibility in both data and financial control processes, the results revealed that the majority of firms still rely on outdated processes across their financial operations. Over three-quarters (78%) of respondents believe their organisation is too reliant on manual tasks and spreadsheets to perform the reconciliation control process. The largest hurdle firms said they face when delivering on digitisation initiatives is integration challenges, which refers to the problems that arise when companies look to harmonize disparate data systems and processes.

Given the above, it is somewhat unsurprising that many firms are reportedly looking to invest in cloud infrastructure (29%), process automation (30%), and reporting solutions (26%), to streamline their back-office operations over the next 12 to 18 months.

Commenting on the findings, Murray Campbell, Regulatory Consultant at AutoRek, said:

“Our latest banking industry survey shows that firms are working hard to modernise and adapt to growing competition and cost pressures, but many are still beset by inefficiencies. Optimising core back and middle-office functions must be a top priority for banks to streamline operations, get in control of their data and achieve regulatory compliance. We look forward to completing the survey in 2025 to see how respondents have progressed.”

AutoRek’s survey took place in December 2023. Download a copy of the full report here.