Emma Ann Hughes examines the FCA and Bank of England's plans to harness the power of data
The UK Financial Conduct Authority (FCA) has published its transformation plan to work with the Bank of England to become "highly data-driven" regulators.
Both authorities already use data to maintain monetary and financial stability, monitor effective competition and deliver consumer protection.
Now, the FCA has revealed plans to focus on the use of advanced analytics and automation to deepen its understanding of how markets function and predict, monitor and respond to business and market issues.
In addition to increased use of external data, the FCA will broaden its remit, investing in skills and practices to better understand and interpret innovative technology.
This approach includes data science units being established within the regulator and exploring new opportunities arising from the FCA's migration to a cloud-based IT infrastructure.
During the next five years, the FCA stated it will work to provide the training and recognition for all employees to identify and champion opportunities to "fully exploit data and deliver improvements in their areas".
The City watchdog announced it will also produce new data management and analytical tools to give the regulator better control, flexibility and power in the way it uses data.
The FCA will also invest in core enabling technology platforms to give the watchdog foundational technologies and infrastructure to fully harness the power of data.
Together with the Bank of England, the FCA will look to explore how technology can link to regulation, compliance procedures and firms' policies and standards, together with firms' transactional applications and databases.
Alongside the FCA's strategy, the Bank of England published a discussion paper, titled Transforming Data Collection from the UK Financial Sector, looking at ways to improve the timeliness and effectiveness of data collection from firms across the financial system.
Christopher Woolard, executive director of strategy and competition at the FCA, said: "Advances in technology are changing the nature of the firms and markets we regulate."
Sam Woods, deputy governor for prudential regulation and chief executive of the Prudential Regulation Authority, said: "Having the right data is vital to our role as a regulator and to the ability of banks and insurers to manage themselves effectively.
"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."
THE HUMAN ELEMENT
However, Keith Richards, managing director of engagement for the CII, said it is vital data is accompanied by human insight to ensure developments and trends in the market are thoroughly understood.
He said: "Digital breadcrumbs cannot replace the knowledge gained by speaking to those who assist consumers.
"There is also a danger that a desire to streamline data collection might mean that different assets might be treated as the same, simply to create large 'buckets' for counting in a standardised way across the sector. This, in turn, might lead to an oversimplified view of the market."
Emma Ann Hughes is communications director of the CII