The volume of data passing through financial systems has been rising at an accelerating rate for more than forty years. This phenomenal growth has meant that data governance and management has played a not particularly effective game of catch up, wherein increasing data volumes lead to ever greater data governance and management challenges.
As a consequence, banks are constantly engaged in data cleansing exercises, report-focussed thinking and updating siloed spreadsheets. Despite its centrality to all business processes, this has prevented decision-makers from seeing data as the critical – and valuable – asset it is.
In this article, the first in a series of articles that explore the role of data governance and management within banks, GreySpark aims to highlight the importance of approaching data as an asset that can drive value-adding improvements in banks.
Increasing Regulatory Scrutiny
Even where banks are not seeking to use data to gain a competitive edge, per se, the importance of data management cannot be underestimated as global regulators push firms toward an enhanced data governance programme that streamlines data management and data reporting to facilitate better management of risk. In 2022, US regulators, the SEC and CFTC, issued combined penalties of more than USD 1.8bn to 15 major financial institutions for violating electronic communication and recordkeeping regulatory provisions. In addition, regulators fined several firms for failing to prevent customer identify theft, which they attributed to a lack of reasonable data governance on the firms’ behalf.
As well as facing large penalties for data management failures, banks face increasing risk from the growth in real-time processes in automated trading, operations and client interactions, evidenced by a corresponding rise in fines by regulators. The UK’s Financial Conduct Authority (FCA), for instance, issued GBP 313mn in fines, marking a significant increase of 65% year-on-year.
Data Governance Considerations
There is no denying that banks are increasingly allocating more time and resources towards the management of their data. However, many firms lack the strategy and framework to effectively utilise it and, consequently, expend significant effort on the location and preparation of data in order to be able to use it.