Andrew Woods | Chief Operation Officer, Risk Management Solutions, Capital Markets, FIS
October 29, 2019
Moving to a digital treasury is key to helping bank treasurers manage regulatory compliance. Regulation never stands still. Banks are still implementing Basel III and Interest Rate Risk in the Banking Book (IRRBB), and now they’re facing the challenge of LIBOR. And there continues to be a steady flow of new reports and policy statements – not to mention varying interpretations across different jurisdictions.
A bank’s treasury department is central to regulatory compliance as this is where the ownership of the balance sheet lies. Treasury also has the most universal outlook of any area within a bank because it deals with customers, business lines and internal departments. So as if staying current on regulatory compliance isn’t hard enough, bank treasurers have to understand the impact it has across the organization.
However, even adopting a standardized approach for IRRBB, for example, involves a lot of work. Staff are busy focusing on the day-to-day operational treasury tasks and don’t have time to focus on regulatory compliance. Smaller banks are particularly challenged because they have even fewer IT and capital resources.
But it’s about more than just compliance. Regulation is a force for good since it imposes a minimum standard that all banks must adhere to. Every bank should want and look to exceed this minimum standard to be best in class in a competitive marketplace.
In addition, banks should look to protect the earnings and capital base in the most efficient way possible anyway. With the right digital technology and staff in place, they can take a best practice approach rather than a minimum standard.
The good news is that regulatory pressures coincide with the development of new technologies. So even as regulators create new regulations and demand more complex and granular reports – and as internal stakeholders require more sophisticated analytics – the latest in digital treasury technology can easily give bank treasurers the data they need to comply.
Digital treasury technology can also help drive automation across treasury processes, freeing up staff to focus on regulatory compliance and its impact across the organization. Additionally, for banks that lack resources, liquidity and capital, these new technologies are often offered in a cloud service delivery model. This can reduce the burden of having to utilize internal IT staff, keeping the total cost of ownership down and helping the bank stay on the latest version of the technology for better performance all around.