Technology will fundamentally change the relationship between banks and regulators, Westpac’s compliance chief said today, adding that both needed to “think really big” about the future of compliance.
“The relationship between the regulator and its licensees will change. We’ll potentially move to a world where most if not all of our data will be shared on a real time basis with our regulator,” Westpac Group chief compliance officer and general counsel Rebecca Lim told a regtech event in Sydney this morning.
“So then you say, well what is the role of the regulator in that situation? What happens to the concept of breach reporting? And whose responsibility is it to sing out when they see something first and change it?”
Lim explained that while many regtech firms that approached the bank had developed solutions for a specific problem, a broader view was needed. “We need to reimagine this,” Lim told the RegTech17 event.
Using the example of dealing with regulatory change, Lim said an automated feed with off-the-shelf controls would be useful.
“But what if we could start that process much earlier and said what’s the problem we’re actually trying to solve here? What if we started that challenge far earlier back in the value chain with our regulators and with our government, and said, what is it we need to do together to ensure legislation and regulation is fit for purpose, it focuses in on the problems at hand, it imagines the problems of tomorrow?”
Once determined, the regulation change would be made available on a platform and immediately “hyperlinked or tapped into some industry utility” and banks would have the ability to “tag into a system where we all document our business processes”.
“So instead of having thousands and thousands of lawyers trying to work out if a particular piece of regulation or legislation applies to your particular business it was, in a quality assured way, done up front and much earlier,” Lim said.
The price of prudence
According to KPMG, the big Australian banks spent between $350 million and $450 million on regulation and compliance each year. A major business cost they are keen to reduce.
Some savings could be easily gained if regulators made some straightforward changes, Lim suggested.
“One of the challenges that we have is that so many of our regulatory agencies request things in very different formats, very different fields, and we literally spend hundreds of millions of dollars to meet their requests,” she said.
Westpac has made some early forays into regtech, working with Sydney-based firm Red Marker since the end of last year. Red Marker’s product Artemis detects 'risky' content as it is being created, helping advisers and licensees to identify and remediate compliance risks associated with the promotion of financial products or services.
The bank’s 300-strong compliance team was also improving its technology capabilities, Lim said.
The function had recently hired an individual with a joint MBA and technology degree, and its lawyers and compliance officers were being taught how to code and run large scale agile projects.
“Because those are the capabilities we need to really embrace this opportunity,” Lim said. As part of that we really need to change our culture and that is to move to a culture of experimentation. It cannot be to wait until you’ve got every I dotted and T crossed before you experiment in this space.”