Financial regulators around the world are requiring contributors to the world’s financial benchmarks to face increased scrutiny of their record-keeping and information governance policies, reports a Thomson Reuters white paper.
The paper “Information Governance Reform for Benchmark Submitters” focuses on the global momentum for regulatory change following the LIBOR and foreign currency benchmark scandals and examines the challenges submitters now face.
The report finds that as most benchmarks are global and therefore cross jurisdictions, individual benchmarks may have multiple sources of regional regulations. As a result, firms are now required to ensure compliance with an expanded scope of guidelines and relevant jurisdictions.
Much submission activity is carried out on instant messaging systems, including consumer applications that are challenging for compliance departments to monitor and control. Large scale, real time surveillance of messaging, email and voice data will increasingly be required to safeguard against potential market abuse.
Stringent record retention requirements will add to benchmark submitters’ data management challenges. These requirements demand cohesive business frameworks for archiving electronic communications data and complying with legal and regulatory requests for information, as well as adequately protecting sensitive and confidential business information.
Technology automation has the potential to help address a number of these challenges, but must be managed properly and be coupled with the proper skilled resources and investigative expertise.
According to the report, market participants have raised initial concerns over increasing compliance burdens, but regulatory oversight is unlikely to be scaled back in the immediate term.
“Benchmarks are essential components for the functioning of global markets, so it is critical market participants have access to information that is accurate and transparent,” said Lesli Fairchild, Head of Collaboration Services, Thomson Reuters.
“At the same time, the challenge of implementing the necessary control structures going forward need not overwhelm front offices and compliance functions.
“By drawing on best practices both from within the financial industry itself and further afield in the legal industry, firms can create a governance structure that helps them act with confidence. This is necessary to ensure the continued accuracy and reliability of global benchmarks,” Fairchild added.