Our client, a large Global Bank that is a Swaps Dealer, was being audited by one of the enforcement arms of a regulator. The bank engaged Risk Focus to perform Regulatory Health Check to identify gaps in its reporting obligations to CFTC and ESMA for their Interest Rates, Foreign Exchange and Commodities businesses. Within 6 weeks the Risk Focus team was able to perform a detailed review of the current workflow for various products and trade life cycle events as well as analysed several samples of the firm’s submissions to the trade repositories.
Accomplishing this in such a compressed time frame was made possible by leveraging the regulatory reporting controls from RegTek Solutions, the software firm spun out of Risk Focus in 2017. The team identified gaps in the firm’s current reporting workflow and data quality issues with the submissions. At the end of the engagement, the team provided high-level recommendations to the client on how to address deficiencies like under-reporting and over-reporting of certain events and erroneous/missing/incorrect reporting of certain fields to the regulators.
The high-level approach followed during the engagement is as follows:
- Review of current reporting workflow for various asset classes and products.
- Identification of trade life cycle event reporting scenarios for each of the asset classes and products in scope.
- Comprehensive analysis of a sample subset of the firm’s submissions to the trade repository by performing a manual three-way comparison between the firm’s submissions, trade repository specifications and the regulations as well as using RegTek’s industry acclaimed tool Validate.Trade.
- Documentation of gaps and issues identified during the analysis and providing recommendations to the client to effectively address the shortcomings.