Unlocking the power of Data: Navigating compliance and maximizing value in wealth & asset management

Data at the heart of banking business model 

Every banking activity generates a digital footprint and as such endless possibilities to capitalize on the data produced. This data is valuable for various purposes, including customer analysis, risk management, fraud detection, regulatory compliance, business intelligence as well as the emerging topic of ESG data used to assess environmental, social and governance factor for the sustainability and ethical performance of companies and investments. According to a study conducted by the International Data Corporation (IDC), by 2025, the volume of data to be analyzed in the banking sector could reach 163 billion terabytes. 

The increasing volume of data being collected along with the emergence of new technologies and data analysis solutions are sources of business opportunities for banks taking an active role with data. 

A trend followed by regulators 

Regulatory authorities followed the trend and progressively issued a series of requirements governing the usage of data by financial institutions. As a result, the number of regulations that impact and will impact data processing is continuously growing imposing standards and requirements on risk management, transparency, data quality, and data protection. 

These new requirements are primarily made to: 

1) Increase transparency within financial markets, build trust among participants and reduce systematic risk (E.g., MIFID II, Basel III, Finma circular 2023/01)  

2) Protect retail clients and their personal data, (E.g., Swiss Data Protection Act) 

Focus on FINMA 2023/01 circular and Data Criticality  

On January 1st, 2024, FINMA circular 2023/01 “Operational risks and resilience” will enter into force. This circular was issued with the clear intention to identify and mitigate potential sources of systematic risks and introduced the concept of “Critical data”.  

On top of the existing focus on “data confidentiality”, FINMA decided to add two extra dimensions namely “data availability” and “data integrity” to qualify data that could jeopardize banks’ ability to provide services or exchange with regulators in a sustainable manner.  

This exercise should be supported by a clear governance ensuring the critical data identified will be monitored during their entire lifecycle. The applicability of the requirements should be «contextualized», i.e., should be specific to the bank business model and risk appetite. 

Ultimately, banks should integrate the new requirements within their operation risk framework and ensure consistency among the data protection layers in place. 

Leveraging the constraint to create business opportunities 

While most of the banks are aware of the significant value of data for their business, only a few decided to leverage their data capital and constitute a real competitive advantage. 

In our experience of advising small to large size banks too many initiatives suffer from working with non-identified, non-reliable or simply non-standardized data. Increasing data value starts with the identification, qualification and referencing of data. FINMA circular 2023/01 brings this requirement for a small scope of data only; the exercise could be extended to the entire organization and could use a data cataloguing solution to enable clear and easy access to data architecture. 

The second most common issue preventing the solutioning of business needs is a lack of clear data ownership. FINMA circular 2023/01 requires the definition and implementation of a clear governance to monitor critical data throughout their lifecycle. Setting a strong data governance framework with company level directives documenting roles and responsibilities and data quality standards will support the creation of a reliable set of data empowering business needs. 

Finally, the third data related issue impacting the banks' ability to grow their business is technology driven. A data platform or more commonly an IT architecture not aligned with the business needs will result in poor performance, limited capacity to develop new IT solutions and the inability to bring new technology such as data science solutions.  

Data transformation as a priority 

More than ever, data is at the heart of banks’ activity and is broadly recognized as a valuable asset.  

With their ambition to mitigate risks, regulators opened the door for banks to build a strong data governance framework that could not only serve the market, but also every single actor independently if they consider this obligation as a real chance to transform and start empowering their business with an asset, they already own.