Evolving regulatory requirements will spur RegTech adoption in 2024 

Regtech (regulatory technology) is one of the fastest advancing areas of fintech, which has otherwise faced a tough macroeconomic environment throughout 2023. It is estimated that the global size of the regtech market will reach $41 billion by 2030, with annual spending on regtech set to reach $200 billion by 2028.  

Sector growth is particularly evident across regulatory reporting, driven by G20 regulatory reforms. The amendments to the Commodity Futures Trading Commission’s swaps reporting rules (CFTC Rewrite) in December 2022 – as well as upcoming changes to the European Markets Infrastructure Regulation (EMIR Refit) and several Asia-Pacific reporting regimes in 2024 and beyond – are part of a global overhaul of G20 trade reporting rules. 

These changes have provided the impetus for financial institutions to review their regulatory reporting set up and according to Deloitte’s 2023 RegTech Universe, regulatory reporting has now become the largest subsidiary of regtech.  

With regulatory compliance at the top of the agenda, how can firms leverage regtech to stay ahead of the curve?  

One of the key themes of 2024 is its uniquely busy regulatory calendar. The world of regulation isn’t known for its rapid speed of development, but over the next 12 months several reforms to global reporting regimes will reach their compliance deadlines. 

These include the implementation of CFTC Rewrite 3.2, EMIR Refit (both the European and UK versions), JFSA (Japan Financial Services Agency), MAS (Monetary Authority of Singapore) and ASIC (Australian Securities and Investments Commission). This makes 2024 a genuinely pivotal year in the regulatory landscape. 

The need to comply with these evolving regulatory requirements has been a key driver behind the growing appetite for regulatory reporting solutions. According to Grant Thornton, 65% of regulated firms anticipate more regulatory obligations in 2024, with regulatory reporting in the top five areas that financial institutions are prioritising in their regtech budgets. As a result, we can expect more firms to turn to regtech solutions to help them comply with the new standards. 

Digital Regulatory Reporting (DRR), an industry-wide initiative to make regulatory reporting more efficient and effective, provides a clear example of how new technology can help financial institutions navigate these upcoming regulatory changes. 

Under the legacy approach, reporting firms face an array of overlapping, often ambiguous and ever-changing data requirements across jurisdictions. For every reporting regime, firms must typically sift through hundreds of pages of legal text, which they must then manually interpret and code in their IT systems. According to the Bank of England, regulatory reporting is a significant burden, costing UK banks a minimum of £2-4.5 billion annually. 

DRR allows market participants to work together to develop a standardised interpretation of the rules and store it in an openly accessible format as both human-readable and machine-executable code. This is a marked shift from the current process where every reporting firm creates its own reporting solution, inevitably resulting in inconsistencies and duplication of costs. 

After going live with CFTC reporting in December 2022, DRR is now in user acceptance testing (UAT) for EMIR Refit and JFSA changes, which are both going live in April 2024. Importantly, this means that firms which adopt DRR early in the cycle, starting from the first stage of the revised CFTC rules, will accumulate the largest benefits on their initial implementation. 

ISDA estimates that 70% of the CFTC and EMIR requirements are identical. In turn, CFTC and EMIR taken together cover most of the other jurisdictions’ requirements, meaning firms adopting a truly global strategy can leverage their work in each area. 

DRR natively supports key updates to the requirements being implemented globally, such as the Critical Data Elements (CDE), the Unique Product Identifier (UPI) which is first going live in January 2024 in version 3.2 of the CFTC, or reporting in the mandated ISO 20022 format. 

As firms look ahead to 2024’s busy regulatory calendar, they should review what worked well in their CFTC Rewrite implementation and apply successful methods to the upcoming regulatory reforms. 

2024 represents a crucial year of a sea change in the regulatory calendar, with significant changes coming across six jurisdictions.  

Whilst technology-driven solutions may have once been seen as a ‘nice-to-have’, we can expect more financial institutions to have a much stronger appetite to move away from traditional systems and implement full regtech strategies.  

REGnosys can help reporting firms navigate this journey, from end-to-end testing of DRR to moving into production. Our Rosetta platform is the first and only low-code collaboration solution dedicated to DRR implementation. Rosetta equips firms with a shared language to digitise the reporting requirements in a transparent, standardised and cost-effective way. The future of regulatory reporting is now, so firms should begin transforming their reporting operations sooner rather than later.  

To find out more about our Rosetta platform and how we are working with firms to prepare for the upcoming regulatory reforms, you can read about our technology here or get in touch for an initial discussion.