EY 2023 Regulatory Reporting Target Operating Model Survey Report

Banking industry volatility propels regulatory reporting to center stage.

We are pleased to present Ernst & Young LLP’s fifth regulatory reporting industry survey, the only survey of its kind in the market for 10 years running. We continue to see great interest in our survey and findings on regulatory reporting insights and trends. Survey respondents included a wide variety of US bank holding companies (BHCs) and foreign banking organizations (FBOs). The 2023 survey will help firms compare their regulatory reporting function and processes against those of other organizations and industry trends. The results of this year’s survey shed light on courses of action to consider in developing an agile, robust reporting function that proactively meets upcoming and long-term regulatory challenges.

Recent volatility in the banking industry has prompted increased regulatory scrutiny and assessment and placed a spotlight on governance — as evidenced by the release by the Federal Reserve Board (FRB) on April 28, 2023 of its postmortem review of the bank failures. As such, the banking industry should expect high levels of supervision and enforcement activity in upcoming years. In addition, the industry is seeing a significant increase in integration activity, which is providing opportunities for applicable firms to review their regulatory reporting interpretations, technology, issues and change management processes, and supporting infrastructure.

Firms should consider taking this time to review the following and make any changes to their regulatory reporting function to optimize it for success: 

• Governance — Assess capabilities and understand the effectiveness of existing protocols, demonstrate remediation program effectiveness and review change management processes.
  • Firms need to ensure that their governance structure is robust enough to accommodate expected increases in reporting requirements and complexity.

• People and processes — Evaluate resourcing and talent needs to address meeting the potential increased regulatory burden. Establish comprehensive documentation of processes and interpretations, and develop recruitment plans to meet ongoing and ad hoc regulatory requirements.
  • Institutions are facing pressure to modernize the regulatory reporting function to reduce reliance on manual processes, improve overall data quality and resulting reporting accuracy, and increase automation of the report production process.

• Performance management — Establish robust quality assurance (QA) and quality control (QC) programs so that data being reported to regulators is complete and accurate.
  • Issues management processes are key to self-identifying issues and tracking them toward remediation. Self-disclosure is more advisable than having regulators find issues that need remediation within a mandated timeline.

• Technology — Analyze whether automated processes are equipped to handle ad hoc requests from regulators, and if so, reduce reliance on manual processes by increasing automation; assess the ability to accurately produce new regulatory reports/ad hoc requests through data quality/strategic data sourcing.
  • In the 2021 survey, 46% of institutions reported having a highly automated regulatory reporting production process. In this iteration of the survey, we looked to gain greater insight into the automation levels of individual report types.