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RegTech and innovation to be a better bank: CBA

Jasper Poos. Head of Governance and Assurance at CBA, spoke at theThe 4th RegTech Liaison Meeting about the member of big four’s interests in RegTech.

Poos said that a shared determination can help build compliance in the industry, and he emphasised the fundamental need for the industry, RegTechs and regulators to collaborate to correct ‘challenging, complexed’ problems.

“There is a lot of momentum building in the innovation of RegTech,” he said.

Similarly, there is a real need for and a growing urgency to ramp up RegTech to the next level. ‘Pace, volume and complexity of regulation’ are all now higher than ever.

Earlier this year, CBA was ordered to pay a $700 million fine for their risk management failures around their intelligent deposit machines (IDMs).

There have also been instances of misconduct and ‘falling below community standards’ that have been examined during the Royal Commission into Misconduct in Banking, Superannuation and Financial Services.

Pace of regulatory development

Poos said that, by 2020, there will 300 million-plus pages of regulations and noted that, for the past five years, the financial industry has seen a staggering 500 per cent increase in regulatory change.

He also added that 50 per cent of the workforce is now working in compliance-related roles.

The CBA has spotlighted RegTech innovation as one of the key areas the bank can use to improve its processes to become a better bank.

CBA’s Innovation Lab, based in London, places a large part of its focus on RegTech. They are now expanding the responsibility of that focus to the Sydney branch, opened in 2014.

The bank is also building an ‘experiment engine’ for policy processes and frameworks.

“We have realised that engaging with RegTechs in short-term experiments is different from strategic outsourcing,” Poos explained.

As a result, CBA has taken what Poos called their global innovation specialists and teamed them up with what he defines as their key risk stakeholders.

A RegTech tribe

“We have created this RegTech tribe,” he said. “The point of this tribe is to accelerate the matching process with the problems and the solutions.”

The tribe is also there to broaden the narrative within the organisation around RegTech.

In the UK, CBA teamed with ING, an external law firm, to assess the outcomes, and also with the Financial Conduct Authority (FCA) to solve some regulatory challenges using technology solutions.

The challenge, Poos explained, is that many of their processes have always been ‘highly manual’, making the process of translating regulations into obligations slow, fallible and ‘not scalable’.

The solution was to be able to deconstruct legal texts and then automatically translate them into a compliance obligations’ register.

Poos said there was high degree accuracy, at 95 per cent.

This resulted in a cutting of labour to about 50 per cent, the knock-on effect of which then freed those normally required do the manual labour to focus on other aspects of GRC.

“Another great outcome of this experiment was that we were able to engage our compliance team with first-hand experience with this new technology. They were able to work with the AI and see what the future holds.”

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