Posted by Irena Gecas-McCarthy, Advisory Principal, Deloitte & Touche LLP, David Wright, Advisory Managing Director, Deloitte & Touche LLP, Dmitry Gutman, Advisory Managing Director, Deloitte & Touche LLP, Dilip Krishna, Advisory Managing Director, Deloitte & Touche LLP, Ken Lamar, Independent Senior Advisor to Deloitte & Touche LLP, Richard Rosenthal, Advisory Senior Manager, Deloitte & Touche LLP, Claudio Rodriguez, Advisory Senior Manager, Deloitte & Touche LLP, Pranav Shanghvi, Advisory Senior Manager, Deloitte & Touche LLP, Mike Thakkar, Advisory Senior Manager, Deloitte & Touche LLP, and Alex LePore, Advisory Senior Consultant, Deloitte & Touche LLP on August 10, 2016
Federal Reserve Board (FRB) officials have made clear in communications with the industry that they expect the foreign banking organizations (FBOs) similar to the US bank holding companies to have the capabilities to access and provide high-quality data, including credible internal reporting/MIS and regulatory reporting data from the outset.1 They point out that FBOs have had more than three years to come into compliance with enhanced prudential standards (after the initial rule proposal) and believe that effective internal MIS and regulatory reporting processes should be in place by now. This expectation—coupled with increased transparency provided by the public disclosure of several regulatory reports—places pressure on FBOs to ensure that their end-to-end data production processes and control frameworks produce accurate and complete reporting. There are additional regulatory reporting requirements that have been proposed and will be finalized as the industry comment periods end and the FRB processes are finalized. These include the attestation of the FR Y-14 reports for the FBO Intermediate Holding Companies (IHC).
Building clear process and control documentation, data governance, and quality assurance processes are critical to demonstrating credible MIS and regulatory reporting implementation. Establishing confidence in reporting will be especially critical to meeting IHC capital planning expectations related to the April 2017 Comprehensive Capital Analysis and Review (CCAR) submissions (the non-public “dry run”). The bar is high. FBOs face reputational risk as a result of the increased transparency provided by the public disclosure of regulatory reporting filings (most notably the FR Y-9C, which will disclose IHCs’ capital ratios, balance sheet information, and financial performance, among other information, as well as public disclosure of CCAR results).