Intellect calls for radical change to the way financial data is reported

The way financial institutions collate and deliver data to regulators needs to change so that risk can be suitably monitored and mitigated, according to Intellect, the trade association for the UK technology industry.

Intellect has published a report that insists that the Independent Commission on Banking's (ICB's) idea to ring fence retail banks is not enough to protect the financial industry from further lapses, and what is needed is better data.

"At present regulators receive data in various different forms from banks, which makes it difficult to accurately evaluate what the risk position of each individual bank is," said Ben Wilson, head of financial services programmes at Intellect.

"What we need is a single, uniform data standard so regulators can interrogate and understand the data they are receiving. Unless this happens regulators may not be able to spot a future crisis and indeed know when part of a bank needs to be resolved".

Intellect argues that the previous financial crisis was largely a result of regulators not being able to interpret huge quantities of risk data, which in turn delayed their response to events.

It also believes the banks themselves struggled to retrieve high quality data from across their disparate organisations and determine their own risk exposure within the system.

Intellect believes that little has been done in the past four years to rectify these problems, and that data quality is poor. It says that the UK is falling behind the US, which has established the Office of Financial Research, which can be utilised as a "single source of the truth" for data standards.

Financial institutions must not be looking to provide more data, but better data more often, argues Intellect.

"It is important that the ICB and wider regulatory authorities do not let the financial crisis ‘go to waste' and that they grasp this once-in-a-generation opportunity to fully address the underlying problems that are still present in the financial system. A retail banking ring fence is not a silver bullet for financial instability," said Wilson.

"In the harsh light of economic reality, we cannot afford another bailout of the banking system and without a means to indentify the build up of risk, how are banks and regulators meant to see when or where the next one is coming?"