Increasing transparency has been a hot topic across the financial services industry. Private Banks’ increased requirements to meet regulatory and reporting standards since the financial crisis, put an added burden on the industry. John Schaffer speaks with Ed Royan, COO EMEA at AxiomSL – a regulatory reporting and risk management company – to find out more
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Regulation has become an integral part of the core issues that banks have to deal with, especially over the past few years as regulators impose more stringent reporting requirements, following the financial crisis.
Ed Royan, COO for EMEA at AxiomSL, says that regulation has been a "huge burden", specifically for private banks, over the last five years.
Royan has worked for AxiomSL for the past six years. Also a qualified accountant, Royan previously worked at Royal Bank of Scotland, Allied Irish Bank and Barclays, where he focussed on Basel calculation and financial operating model projects.
AxiomSL is a provider of regulatory reporting and risk management solutions. The company is headquartered in New York and was founded 20 years ago; however the software provider has experienced its most significant growth in the past few years in response to increased demand for regulatory services. The firm services banks such as Morgan Stanley, Deutshe Bank and ABN AMRO to name a few.
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By GlobalDataIn March 2015, Swiss private bank Julius Baer chose Axiom to automate its group-level and Swiss entity Basel III calculations and reporting, as well as its group-level and Swiss entity statistical reporting. This was an extension of Julius Baer’s use of AxiomSL for financial reporting in Hong Kong and Singapore.
Royan tells PBI how the complexity of banking regulation has developed and how this has lead to AxiomSL’s growth:
"When I got involved with regulation, which was over 10 years ago now, Basel II had just come along and everyone was thinking – this is a new challenge, but things will quieten down.
"But it hasn’t quietened down. It’s actually got busier and busier and worse and worse in terms of the burden of new regulations."
Royan adds that the rapidly evolving regulatory environment is not only difficult for banks but the regulators themselves, as they struggle to keep up with the avalanches of changes that they publish.
Private banks often have to satisfy many regulatory processes as they provide a multitude of services to their demanding wealthy client base, who often hold assets in multiple jurisdictions. This in turn can cause greater challenges in comparison to financial service providers which specialise in one area. Royan tells PBI that the regulatory environment for private banks is "slightly unfavourable in some ways".
"The challenge for private banks is pretty much the same as the investment banks. They’ve still got to do their capital reporting, credit risk, market risk, statistical reporting, liquidity reporting and liquidity calculations.
"With private banks, even though they have lower transaction volumes, their product sets are still quite large.
"So they end up falling into all the different regulatory requirements anyway. Then if you look at tax, the Common Reporting Standards (CRS) and FATCA – they’ve got a lot of those individuals on their books who are within the scope of the reporting requirements."
Regulatory requirements are not standardised across jurisdictions which throws another set of challenges into the mix for banks. However, Royan suggests that there is a move towards global "harmonisation":
"Countries where demanding regulations have been in place for some time (such as countries in Europe) are better prepared than other countries and regions that have been catching up fast, such as the Middle East and China.
"There has been a general move towards harmonisation across countries and, with more regulatory bodies like the FSB, EIOPA and EBA, rules have become more standardized across regions and the globe."
Ed Royan, COO EMEA at AxiomSL
Technology differentiator
According to Royan, AxiomSL’s main differentiator is that the software solution is based upon one core platform, with regulatory applications being bolted-on to meet the requirements of each financial institution across different jurisdictions.
"We use the same platform across the globe. So the same platform that we use in Europe is the same platform that we use with our American clients and our APAC clients.
"The platform has been built up in a very strategic way and can do a lot of things such as ops reporting, tax reporting, financial reporting, regulatory reporting – so its quite dynamic in what it can offer."
Royan adds that AxiomSL’s strength comes from a foundation in data management where the company is used to dealing with large volumes of data.
"If you look at regulatory reporting, a lot of it has to do with data.
"If you haven’t got your data right, then whatever you’re calculating and whatever you’re reporting isn’t going to be right either."
As regulators increase their demands for data, Royan feels that AxiomSL’s system will allow banks to be in a "good position" with regulators. However, he adds that if banks have not invested in AxiomSL or an equivalent system, it could cause difficulty:
"Some banks are probably using a multitude of systems, querying different source systems and shoehorning their data into reporting templates."
A Niche industry
Although regulation is one of the key topics for banks in the current climate, Royan tells PBI that there is a distinct lack of professional regulation training available, causing experienced individuals in the field to be highly sought after.
"If you come out of college as a graduate wanting to go into regulation, there aren’t many training courses covering it.
"Even if you did an accounting degree, you’ll find that no elective exists.
"You find the amount of people working in regulation is really narrow and it’s the same people at all the different banks .
"They become very sought after as there’s obviously a demand for it and its keeping salaries higher around regulation in general because you can’t go off and become a qualified regulator. You don’t find someone who’s done a qualified Bank of England course."
