UK financial watchdogs to hone data crunching to spot problems sooner

By Huw Jones

LONDON, Jan 7 (Reuters) - Britain's financial regulators
said on Tuesday they will transform their data crunching
capabilities over the coming decade to spot problems in banks
and markets earlier.

Banks and insurers must report a wide range of data, such as
how much capital and cash they hold and exposures to risky
instruments like derivatives.

Data collection has grown sharply since regulators failed to
spot a global financial crisis in the making a decade ago.

The Bank of England and the Financial Conduct Authority
(FCA) published plans to obtain data more efficiently from
banks, insurers and investment firms, and to analyse the data
better to predict, monitor, and respond to issues.

"Recent developments in technology should allow us to
improve how we collect data from firms, making reporting more
timely, more effective and less burdensome for firms," said Sam
Woods, deputy governor at the Bank of England.

The FCA said it wants to transform itself into a "highly
data-driven regulator".

The BoE is setting itself a decade-long timeline for the
"substantial challenge" of reforming data collection so that it
could explore "more radical changes".

There would be no "one-size-first-all" solution, the BoE
said in a nod to lawmakers who want less burdensome rules for
smaller banks to encourage competition.

Consultants McKinsey estimated last year that regulatory
reporting by UK banks cost them 2 billion to 4.5 billion pounds
annually as they fill in mandatory forms that could each contain
thousands of data points.

John Liver, a UK financial services partner at consultants
EY, said automated collection could cut costs. "The path to
transformation will require considerable effort... but the
potential rewards are very significant," he said.

The BoE set out ideas for reforming data collection in a
discussion paper and will respond to feedback later in the year.

Changes could include more detailed common data inputs and
modernising how the BoE writes reporting instructions, such as
by using computer code instead of everyday language.

Another solution could be to introduce a ‘pull model’ that
would allow the BoE to query certain data held within firms and
generate reports on demand, the BoE said.

(Reporting by Huw Jones
Editing by Alexandra Hudson)