When Regulators Request What Doesn't Exist: A Call for Forward-Thinking in Financial Data Management

In today's fast-evolving regulatory environment, financial institutions are often expected to provide data that they either do not have or did not realize they needed to retain. This gap between regulatory expectation and institutional reality can lead to significant challenges amongst which we can list missed deadlines, compliance risks, and strained relationships between FIs and regulators.

So why does this keep happening?

Often, it stems from a lack of proactive communication and future-oriented thinking on both sides. Regulators develop new guidelines based on emerging risks or global trends, while FIs are typically structured around current operational and compliance requirements. The result is a disconnect! Regulators request data that seems logical and necessary to them, but FIs haven't prepared their systems or processes to capture it.

So how can this gap be bridged?

1. Proactive Dialogue: Regulators and FIs need to establish ongoing conversations, not just during audits or inspections, but throughout the year. Early consultation on upcoming regulatory expectations allows FIs to plan, assess feasibility, and adjust systems before new requirements go live.
2. Forward-Looking Data Governance: Financial institutions should anticipate future data needs, not just based on current compliance rules, but also based on risk trends, market shifts, and international regulatory developments. Strong data governance practices, with input from legal, compliance, and analytics teams, can prepare institutions to capture the “unknown unknowns.”
3. Scenario Planning & Mock Requests: Just as FIs run stress tests, they could periodically conduct mock regulatory requests to test the accessibility, accuracy, and completeness of key data points. This proactive approach highlights gaps before real requests occur. Adopting a proactive and not a reactive approach.
4. Flexible Data Architecture: Investing in adaptable data systems and especially those that integrate reporting, analytics, and compliance functions can reduce the friction in responding to new or complex data demands which generally goes through a system upgrade, data migration, project management involvement...
5. Education and Collaboration: Both regulators and FIs benefit when they understand each other’s limitations and objectives. Regulators can offer guidance on data formats, intent, and use cases, while FIs can highlight operational realities and legacy system constraints.

To conclude, the solution is not for one side to be more prepared than the other. It’s for both to think ahead, together. Because regulatory expectations will keep evolving, and the only way to keep up is to build a shared understanding of what’s needed today and what might be needed tomorrow.

In a similar way, it’s time we rethink data archiving and define the lifespan of data. A shared understanding between regulators and FIs could be the key to closing future gaps, but that’s a conversation for another day.