FCA Working on New Data Analytics Program

The Financial Conduct Authority (FCA) is turning to the cloud and advanced analytics in tandem with the industry it governs, which may ultimately reduce the cost of regulatory reporting, said Steven Green, head of central data services, which is part of the innovation division in strategy and competition at the FCA.

As financial services firms adopt technologies like cloud computing, regulators are trying to evolve along with them, moving from a focus on control over data to one that looks at ways to exploit the data.

“We are not using advanced analytics and technology just to do our job better. Actually, we are also using it to understand you better, so we best understand how you are moving forward as an organization, so we can react and not just draw a line and stop what you are doing,” Green said, addressing a room of technologists from banks and other financial institutions while speaking at this year’s European Financial Information Summit (EFIS) in London.

“We are using this journey and these changes that are available in the world at the moment to understand how to regulate better, and to change the way we regulate,” Green said.

One area where the FCA’s strategy is starting to work well is in the realm of digital regulatory reporting, Green said.

“We have done a lot of industry tables around how we can lower the cost of regulatory reporting. I’m in charge of data collection at the FCA, and there is a lot of activity where we are trying to automate collections. So we are working with big banks and the Bank of England. There is a collaborative journey there, because the FCA does not have the answers alone,” he said.

The regulator has over the past couple of years moved almost all its technology estates to the cloud, which aside from offering the promise of more flexibility and scale, has meant that it can also roll out what was a data analytics pilot program across the organization. The FCA can leverage the huge amounts of data from the 61,500 firms under its purview.

In the last year or so, the FCA has brought together all the data initiatives that were happening across the organization, using data lakes and new methods of data collection. The idea now is to reduce areas of overlap and find pockets of resistance.

“We are constantly being asked for greater efficiencies, to be more effective around monitoring that broad sweep of sectors that we have,” Green said.

The FCA wrote its data strategy back in 2013, and it was “old school,” Green said, focusing as it did on governance and control. In 2015, the organization started thinking about encouraging fintech, and doing more systematic data intelligence. This involved the collection of data across UK financial services, including from social media, news articles and surveys, and interviewing thousands of financial services workers across the UK.

“We started to appreciate the amount of benefit and efficiency we could gain from using data intelligence more broadly,” Green said.

The regulator had also been thinking about what types of data were needed within its own organization, who needed it, and for what. In 2017, the regulator realized that the lessons it had learned needed to be spread more broadly, “and it was really then that we decided to start moving more consistently to the cloud with many of our IT services,” Green said.

The analytics function began almost as a kind of start-up within the FCA. Many on the team had backgrounds in data, but not in financial services, and were brought in to challenge the status quo of how analytics were used in the organization.

“They were a small team at the time—only a few dozen individuals—but the idea was to leverage the experience we had with regtech and fintech conversations externally and look at how we would apply those internally,” Green said.

Now in 2019, the FCA is bringing together a new data strategy to the organization and over the next two or three months will publish a version of this for the public. This new strategy will be driven by the need to exploit the data and integrate it with every function and process across the organization.

The FCA is also publishing more data to the public, Green said.

“We created a hub last year and the idea was that we publish as much data as possible externally so that some of your organizations and consumers can get value from what we have. So we are not saying, ‘Give us data, give us data,’ and then we hide it among ourselves and never know what it means for financial services. … The idea is to give value back on what you are giving to us: aggregated data so that you can benchmark yourselves, so that you can see what we are seeing,” he said.