Many firms remain “in the dark” on new SFTR reporting rules, says Cappitech
03 November 2020 Herzliya, Israel
Image: zimmytws/adobe.stock.com
A lack of expertise around the Securities Financing Transactions Regulation (SFTR) is among the industry’s biggest challenges and causes of concern, according to Cappitech’s latest global regulatory reporting survey.
In its third annual market review, Cappitech gathered data from 89 respondents, representing banks (30 percent), brokerages (28 percent), asset managers and hedge funds (15 percent) corporates (8 percent) and other financial and non-financial institutions on what they perceived to be the largest hurdles of the past 12 months and next year.
Just over half are headquartered in the EU, with a further 22 percent in the US.
Nearly half (46 percent) of all respondents view changing regulation, particularly SFTR, as the main challenge for the next 12 months, says Cappitech.
The firm notes that all respondents were “extremely grateful” for the postponement of SFTR phase one until July, given the Q1/2 business disruption, although, Cappitech adds, “many remain in the dark about how to interpret the new rules or are concerned about the practicalities and quality of the data that they will be asked to provide”.
The greatest challenges in SFTR reporting lie in a lack of expertise (66 percent), according to survey respondents, together with a lack of understanding of the regulation.
Technical concerns include data quality and data fragmentation as well as the number of data fields. Cappitech adds that, surprisingly, cost and conversion of csv files are relatively minor concerns.
“There aren’t that many people familiar with both reporting and the underlying products,” says Ronen Kertis, CEO and founder of Cappitech.
“Also, even if you know repos, you may not be familiar with the mechanics of stock lending or margin lending, which could mean we will be seeing firms make fixes in the future as a result of lack of knowledge and little practical experience in the market for SFT’s reg reporting.”
More broadly, the survey found transaction reporting remains the most pressing challenge facing respondents with more than 57 percent citing it as a key concern, up from the 46 percent recorded in the 2019 survey.
Moreover, the majority of firms (65 percent) had to change their reporting over the past 12 months due to inefficiencies and errors, notably in timing and granularity for reporting but also because of the regulators’ expectations of routine, periodic checking.
As a result, the improvement of data quality and the enhancement of reporting knowledge and expertise were cited as the most important strategic priorities of 2021 for 69 percent and 55 percent of respondents respectively.
However, Cappitech highlights that concerns over lack of budget, which nearly tripled, from 25 percent to this year’s 66 percent, will likely have an effect on data quality as well as the spend on expert support.
The full survey report also covers the consequences of Brexit, the coronavirus pandemic and other trends on global regulatory reporting.
In its third annual market review, Cappitech gathered data from 89 respondents, representing banks (30 percent), brokerages (28 percent), asset managers and hedge funds (15 percent) corporates (8 percent) and other financial and non-financial institutions on what they perceived to be the largest hurdles of the past 12 months and next year.
Just over half are headquartered in the EU, with a further 22 percent in the US.
Nearly half (46 percent) of all respondents view changing regulation, particularly SFTR, as the main challenge for the next 12 months, says Cappitech.
The firm notes that all respondents were “extremely grateful” for the postponement of SFTR phase one until July, given the Q1/2 business disruption, although, Cappitech adds, “many remain in the dark about how to interpret the new rules or are concerned about the practicalities and quality of the data that they will be asked to provide”.
The greatest challenges in SFTR reporting lie in a lack of expertise (66 percent), according to survey respondents, together with a lack of understanding of the regulation.
Technical concerns include data quality and data fragmentation as well as the number of data fields. Cappitech adds that, surprisingly, cost and conversion of csv files are relatively minor concerns.
“There aren’t that many people familiar with both reporting and the underlying products,” says Ronen Kertis, CEO and founder of Cappitech.
“Also, even if you know repos, you may not be familiar with the mechanics of stock lending or margin lending, which could mean we will be seeing firms make fixes in the future as a result of lack of knowledge and little practical experience in the market for SFT’s reg reporting.”
More broadly, the survey found transaction reporting remains the most pressing challenge facing respondents with more than 57 percent citing it as a key concern, up from the 46 percent recorded in the 2019 survey.
Moreover, the majority of firms (65 percent) had to change their reporting over the past 12 months due to inefficiencies and errors, notably in timing and granularity for reporting but also because of the regulators’ expectations of routine, periodic checking.
As a result, the improvement of data quality and the enhancement of reporting knowledge and expertise were cited as the most important strategic priorities of 2021 for 69 percent and 55 percent of respondents respectively.
However, Cappitech highlights that concerns over lack of budget, which nearly tripled, from 25 percent to this year’s 66 percent, will likely have an effect on data quality as well as the spend on expert support.
The full survey report also covers the consequences of Brexit, the coronavirus pandemic and other trends on global regulatory reporting.
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