UK financial services firms set to miss FCSC legal requirement

Many UK institutions are likely to fall foul of new FSA regulations

UK financial institutions are struggling to comply with new legislation laid out by the Financial Services Authority (FSA) due to poor-quality legacy data and data quality management, according to a new report from analyst JWG.

The FSA introduced new rules for the Financial Services Compensation Scheme Reform (FSCS), including the requirement to create a "single customer view" (SCV). According to the report, many financial institutions are likely to miss the deadline of 1 January 2011.

The report states that 41 per cent of respondents who were responsible for data in the company were unaware of the obligation.

Colin Rickard, managing director EMEA at DataFlux, commented: “Every organisation is registered with the regulator and would have been contacted with the requirement. There should be no case for ignorance.”

Firms contacted by JWG stated that data management issues and a lack of funding were the main barriers to compliance.

"The regulator said this would require significant investment, and there has been a real shortfall. Creating the SCVs is very complex due to mergers and acquisitions and the state of legacy data. This regulation has highlighted the data quality problem that these institutions have," added Rickard.

The SCV is a view of all the products a financial services firm holds on a customer, and a view of all the balances on these products. This information needs to be updated regularly and provided to the regulator under the terms of the FSCS. The FSA would use this information to provide compensation in the advent of another Northern Rock-style collapse.

Institutions which fail to comply can expect penalties running into millions of pounds, although the extent of potential fines has not been laid out.

"There were £7.3m penalties imposed on three investment banks recently by the FSA due to the quality of data submitted on trades," said Rickard. The fines could be of a similar level for failure to comply in this case.