Reps. Darrell Issa (R-CA), Carolyn Maloney (D-NY), and Randy Hultgren (R-IL) headlined our third annual Financial Data Summit last week – and their new proposal in Congress is going to transform financial regulatory reporting.
Together with 26 other bipartisan Members of Congress, Reps. Issa, Maloney, and Hultgren introduced the Financial Transparency Act in the House of Representatives. The Financial Transparency Act directs all eight major financial regulatory agencies to adopt standardized data formats for all the information they collect from the private sector. An op-ed by Rep. Hultgren explains how the bill will allow financial regulatory data to flow automatically from regulated entities to agencies and investors, empowering analytics and reducing compliance costs. Rep. Maloney said she expects the House to pass the Financial Transparency Act “this year.”
The financial industry is ready to embrace data standards as the way to reduce compliance costs, through automation. JP Morgan managing director Robin Doyle, appearing alongside representatives of the the American Bankers Association, and CFA Institute, told our audience that if financial regulators adopt the standardized Legal Entity Identifier (LEI) as the universal identification code for the companies and firms they regulate, banks will be able to track and report their counterparties and transactions more cheaply. The Financial Transparency Act makes it mandatory for the 8 major regulators to settle on a single identification code, replacing today’s jungle of dozens.
The LEI is the likely choice of regulators, should the Financial Transparency Act pass. Stephan Wolf, CEO of the Global LEI Foundation, which maintains and administers the LEI, shared his nonprofit organization’s aspirations to make all regulatory reporting interoperable.
By replacing financial regulatory documents with standardized data, the Financial Transparency Act will also empower the new RegTech sector. At our Summit, five surging RegTech companies explained how they are disrupting regulation and compliance – and how standardization will help them disrupt faster: Kabbage, 8of9, Enigma, Intrinio, and OpenCorporates.
The Data Coalition is working to build support for the Financial Transparency Act in Congress, buoyed by the new supporters and attention we earned at the Financial Data Summit. Already, regulators such as the SEC are choosing to voluntarily take some of the steps that the Financial Transparency Act would require – without waiting for a mandate from Congress.
But our ultimate vision goes beyond financial regulation. We aspire to align the data formats of all U.S. regulatory agencies – so that companies’ software can automate all of compliance. This concept, known as Standard Business Reporting, isn’t science fiction. It’s already in place in Australia and the Netherlands. Coinciding with the Financial Data Summit, our sister organization, the Data Foundation, and PwC co-published the first U.S. research paper on this topic, Standard Business Reporting: Open Data to Cut Compliance Costs.
We’re working to modernize financial regulation because we believe that freely-flowing data will reduce costs and build opportunities for investors, agencies, and the financial industry alike. Thanks to Congressional leadership and forward-thinking agency leaders, we’re confident of future change.