On 7 April 2020 the FCA published its 2020/21 Business Plan announcing that, in addition to its key priorities, one of its cross-sectoral priorities will be further work in the sphere of innovation and technology.

In particular, the FCA intends to invest in the coming year in new technologies and skills to make better use of data for regulatory purposes and to reduce the burden of regulatory reporting on firms. This follows on from the FCA’s work on ‘Digital Regulatory Reporting’, or DRR, first explored in 2016. Together with the Bank of England (BoE), the FCA is working to explore how technology could make it easier for firms to meet their reporting requirements. The FCA observes that the current manual process is complex, with over 20,000 rules across 58,000 firms. Each firm, moreover, is required to interpret the reporting rules and data requirements themselves, leading to costly confusion, duplication and inefficiency.

In order to address these issues, DRR seeks to create a shared understanding around reporting rules and data. One possible way of doing this is through a collaborative platform which connects the regulator to firms. Under this proposal reporting instructions are, where appropriate, translated into code which can be sent as a request through the platform from regulator to firm, and in turn the information requested is pulled directly from the firm’s database. This automated process would bypass the need for firms to interpret written rules, reducing the potential for ambiguity. DRR also seeks to address the heterogeneity of data, envisaging the standardisation of its description and identification so the same data is easily identifiable across firms and systems.

In January 2020 the FCA published a Viability Assessment on DRR, which indicated that while pursuing DRR could introduce some new costs, there were financial and intangible benefits for firms and regulators, including improving regulatory decision making and helping firms deliver better services for their customers. It is important to note that the Viability Assessment on DRR focussed particularly on mortgage and derivatives reporting, as both are areas of significant regulatory reporting and interest to regulators. The Viability Assessment acknowledges that the best way to pursue DRR is in small incremental steps, and it would appear likely that when we do start to see DRR being rolled out, it will be initially to mortgage and derivatives reporting for a period before it is expanded to other sectors.

The BoE also released a discussion paper in January 2020, which is intended to form a dialogue to shape the evolution of reporting over a 5-10 year horizon. This timescale acknowledges the challenges which will need to be addressed before changes can be implemented. Written responses to the discussion paper were submitted on 20 May 2020 (extended from April 2020 due to Covid-19). The BoE aims to publish an update on responses and the proposed next steps during 2020, although this timeline may also be affected by Covid-19.