MiFID II date confirmed – but why are financial institutions doing more and achieving less?
As the European Commission finally confirms an implementation date for MiFID II, Volker Lainer of GoldenSource explains why now is the time for financial institutions adopting a quick fix approach to regulation to reconsider.
After waiting and wondering, financial institutions finally have a firm date of January 3rd 2018 for MiFID II compliance. Whether this extended deadline provides firms with sufficient time to get their houses in order is debatable, but one thing is certain, huge amounts of money have already been spent on regulation.
The problem is that for most major financial institutions, spend alone is not the biggest issue. The underlying challenge is that firms are still struggling to increase margins while keeping pace with the flurry of regulatory demands. To date, in response to a costlier and more complex landscape, many of these firms have opted for ‘sticking-plaster’ solutions to address individual regulations as and when they come up. Unfortunately, this approach has only created silos of duplicated effort and data spend. The consequence is that firms have had to deal with the headache of duplicating data management efforts across business lines.
This approach would perhaps be sustainable if it was only MiFID II reporting requirements that needed addressing, but unfortunately, this is just one part of the regulatory puzzle. In a world of AIFMD, BCBS 239 and more, a siloed approach doesn’t hold water. In a market that demands data keep pace with regulations, can firms realistically hope to scale this tactical approach to meet new requirements? It seems like transforming data and shaping it for reports on the fly is too light a touch.
Surely it is wiser to take a less is more approach? It is, but only with better data management practices coupled with solutions that scale. The good news, for those seeking an alternative approach, is that fragmented data management point solutions can also be consolidated through a flexible data model. This is combined with a common approach to governance that, crucially, can, be applied across all regulations.
This should make life easier – as it is simpler to locate the right information, in the right place, at the right time, when it is fully understood, and available for reporting on demand. With an implementation date now rubber stamped, MiFID II is understandably front of mind, but, over the coming months, there will be more issues. Regardless of the regulation, it is not really about how much money is spent, more where exactly the money is going, and whether the solution in place is flexible enough to adjust to new requirements further down the track.