RegTech in Securities and Markets Regulation - Colm Kincaid, Director of Securities and Markets Supervision

05 April 2018 Speech

Central Bank of Ireland

Remarks delivered to RegTech Sprint Technology Roundtable hosted by the Central Bank of Ireland.

Good morning, and welcome to the Central Bank of Ireland.

We are delighted to be hosting today’s RegTech Sprint Technology Roundtable. This event has been organised in association with the UK Financial Conduct Authority and the Bank of England and with University College Cork’s Governance Risk and Compliance Technology Centre (GRTC). I would like therefore to extend a special welcome to our colleagues from the FCA, Bank of England and UCC, who have done so much to advance the topic that we are about to discuss over the course of this morning: Model Driven Machine Readable and Executable Regulatory Reporting.

Before hearing from our excellent line up of speakers, I wanted to take the opportunity to set today’s event in the context of our work here at the Central Bank of Ireland.

The opportunity to host today’s event was mentioned to me on my first day in my new role as Director of Securities and Markets Supervision here at the Central Bank. I grasped the opportunity that very day. I did so because I believe it is essential that we improve how we use technology to regulate if we are to deliver on our mission to safeguard stability and protect consumers. This is especially the case for securities and markets supervision.

As a solicitor in Linklaters in the 1990s, I worked on the development and launch of Linklaters’ Blue Flag platform. Its purpose was to provide an online facility for financial institutions to create bespoke manuals for their business by typing into a website what regulated activities their firm carried out and where. A computer programme would then generate the rulebook for their business in the UK, Europe and beyond. In the days when a phone was still a thing whose main purpose was to speak to another human being, this was a ground breaking initiative. It opened my eyes to a number of things which hold as true today as they did then:

  • First, financial markets will continue to become more and more complex.
  • Secondly, regulation will have to get smarter and more coordinated across sectors and borders to deal with this complexity.
  • Thirdly, technology can help us do this.

In my own new area of securities and markets supervision, we have established a dedicated Securities and Markets Analytics Team (our SMART team) to enhance our use of data. Today we receive more than 10 million records a day in this one Directorate of the Central Bank alone. This figure will be even higher for our colleagues in regulators with larger volumes of securities and markets activity to supervise. In a context where, even for a modestly sized financial services regulator such as the Central Bank of Ireland, we are dealing with millions of records a day to police legislation containing thousands of provisions (the MiFID II regime alone has been described as comprising more than 1.5 million paragraphs1), it is clear that humans alone cannot perform this task effectively.

We need technology to enable us to do our job.

The case for the use of technology to lower the cost of regulation and of doing business is as clear as it is important. However, our interest as a regulator in this field goes beyond arguments around reductions in cost, and the point of principle that the users of financial services should benefit from such reductions in cost. Rather, it is clear that technology is now integral to having a securities market that is properly and effectively regulated, while ensuring that the best interests of consumers are protected.

A proper and effectively regulated market is one that:

  • Provides a high level of protection for investors.
  • Is transparent as to the features of products and their market price.
  • Is well governed (and comprises firms that are well governed).
  • Is trusted, by both those using it to raise funds and those seeking to invest.
  • Is resilient enough to continue to operate its core functions in stressed conditions.

In 2018, as well as continuing our work to operationalise a wide range of new legislative provisions, we have set ourselves a priority to improve our supervisory effectiveness through greater use of data. RegTech will be a central part of this.

It is also central to this strategy that the data supplied to us is accurate. In a survey conducted by KPMG in 2016, 84% of CEOs said they are concerned about the quality of the data they base their decisions on2. The case for regulators to be vigilant and intrusive on the topic of data quality is clear. So too is the case for using technology to increase the reliability of the data we receive.

In 2018, we will also embark on the development of a new strategy and framework to supervise wholesale market conduct more effectively. In a context where many large wholesale firms across the globe have had to pay out or provision in the range of US$0.5-1 billion3 each for conduct related issues in recent years, it is clear that assertive wholesale conduct supervision is appropriate.

As things get more complex, it is perhaps worthwhile concluding by taking a moment to get simpler. The object of securities markets has not changed – to provide a safe, transparent and cost-effective mechanism for taking money that a person is not using right now and putting that money to use in the economy to improve people’s lives. Nor is there any change to what is needed of the human beings involved in that activity – to act honestly, professionally and in the interests of the integrity of the market. Nor has the need lessened for regulation that is robust, professional and transparent.

Technology has been a reality in our daily lives for some time now. We need to continue to harness its potential to ensure securities markets are properly and effectively regulated.

I look forward to a stimulating discussion. I thank all our speakers for joining us today and I thank you for your attendance and participation.



2 KPMG International’s 2016 Global CEO Outlook Study.

3 Oliver Wyman, The straight and narrow: Managing conduct risk in wholesale banks.