The US Department of the Treasury, the Federal Reserve Board (FRB), and the Federal Deposit Insurance Corporation (FDIC) announced steps to protect all deposits under an emergency lending programme and for the FDIC to finish the resolutions for Silicon Valley Bank (SVB) and Signature Bank. The US government is now taking steps to keep the banking system strong. US Federal Reserve will further investigate and write a report on the failure of SVB from a regulatory perspective.
Even though bank failures are rare, recent events at SVB, Signature Bank, and Silvergate Bank are likely to put pressure on banks to look at and improve their corporate governance and risk measuring and monitoring systems, as well as test their capital levels, complexity, and business models under stress. It’s a reminder of how important it is for the bank to have a good risk management programme to keep its operations safe and sound.
Since this is the scenario in the US, Financial Conduct Authority (FCA) in the UK is expected to give a full report and analysis of why the banks failed. As a result, changes to regulations are likely, and bank management needs to ask the right questions to be ready.
The Financial Services Compensation Scheme (FSCS) in the UK provides protection and compensation to customers of financial services firms. FSCS compensates the eligible customers within 7 days of failure. To do this, a standardised Single Customer View (SCV) should be in place which supports resolution options, such as a transfer of deposits or a bail-in, as well as a payout. You can find the SCV requirements for deposit takers regarding in the Depositor Protection Part of the Prudential Regulation Authority (PRA) Rulebook. You can also find the PRA’s expectations for deposit takers here.
Moreover, FSCS updated its “Single Customer View (SCV) Guide” which aims to provide a detailed overview of the Single Customer View (SCV) initiative, covering a range of topics to improve the data quality and governance keeping in mind the deposit takers, insolvency practitioners, SCV system auditors and SCV system vendors.
Good Data ensures Better Compliance. First and foremost, business and product development competencies are the foundation of successful competition in today’s market, and effective development necessitates fundamentally enhanced methods for organising the development process. Financial institutions are ramping up their capabilities, products, and services to be more competitive with their peers. It involves an increase in risk as well. Investments in governance, risk management, and compliance should be taken in parallel to their upgrading to avoid paying big to fail.
MG with its 20+ years of RegTech industry and being a leader in delivering regulatory products for banks and FIs, we list out the best practices that every FIs should follow to stay up to date with their data and daily operations to comply with FSCS requirements. Read on!
- Stay up-to-date on FSCS regulations and requirements: The FSCS provides guidelines and rules for firms to follow to be eligible for protection and compensation. FIs need to stay informed about any changes or updates to these regulations.
- FIs have to maintain status codes at the CBS level to identify the reporting eligibility of the customers. FI has to update the customers on at regular basis and update status codes for the customer/account where required.
- At regular intervals, FI must review the customer and accounts details and update the customer details if the data does not comply with FSCS requirements. It is recommended the FI can have an auditing platform that should audit the generated SCV/Exclusion and report any issue in the files. So, FIs can make use of the exception report and make necessary corrections at the data level or file level.
- If the customer details are unable to meet the FSCS requirement and FIs not able to correct the details then they have to allocate a separate status code for the particular issue and report the customer in the NFFSTP category.
- To categorise and report the customer details based on the status codes in SCV/Exclusion, the FIs have to have an SCV system that must have the capability to generate the SCV, Exclusion and ineligible report based on the customer/account status codes. Also, it must have the capability to generate the report within 24 hours.
- At regular intervals, FIs must conduct internal/external auditing to ensure that the SCV system satisfies the PRA-DP 11.1 and 11.2 and that PRA SCV and marking requirements are met.
- FIs have to maintain a risk register to record the issues that arise during the SCV report generation process.
- FI should communicate to the customer during the onboarding process about the eligibility of the customer for the protection provided by the FSCS.
- The FIs must, at least annually, take reasonable steps to confirm that a depositor that it has classified as a micro, small and medium-sized enterprise continues to be a micro, small and medium-sized enterprise using the exchange rate prevailing on the 3 July immediately preceding the date on which any confirmation is undertaken.
- At regular intervals, FIs have to reconcile the balance reported in the SCV file with the balance in their GL report generated in the CBS and ensure the accounts balance is tallied.
- FIs have to keep the following SCV documents up-to-date.
- a. SCV Effectiveness document
- b. Account Status Codes
- c. Product Codes
- d. SCV Policy Statement
- e. AML and CTF Manual
- f. SCV System procedure document
- g. SCV System process flow document
- h. SCV System Diagram
- i. Risk Registry
- It is recommended by FSCS to implement PGP encryption for encrypting the generated SCV files to prevent any manual corrections/tampering with the SCV files.
Banks must reconcile and fix existing data gaps and take the right stepsto make sure that accurate and complete records are kept at the time a newclient is added or an account is opened. Also, it might be important to make aneffort to learn more about the concentrations of current deposits in order toreduce liquidity risk and allow accounts to be spread out.
Regulators are more stringent to cope with the advancements in the BFSI sector. The goalpost is changing every day, and banks should prepare themselves for the increasing regulatory demands. Adopting a single customer view is all about making the most of an organization’s most valuable assets, which are its customers. In short, implementing a solution for the single customer view is a journey, not a one-time project. Putting it to use in your business is an ongoing process that takes time and effort. The journey starts with good data and accurate information about customers, and then everything else builds on that.
With our constant pursuit to bring newer tools and innovations, Macro Global is on the quest for more solutions and services that bring revolution in fintech. To partner with Macro Global, and to leverage more benefits, please reach out to salesdesk@macroglobal.co.uk or call us at +44 (0)204 574 2433.
FAQ for Blogs
What are all the processes involved in auditing the generated SCV report?
- Data Mining, Cleansing, Enrichment, and Reconciliation: Uses AI-based algorithms to identify inaccurate customer and account holder information, account segregations, data duplication, and more.
- Full Audit History and Comparison: Maintain a full audit history and facility to compare previous ones to track metrics for data remediation.
- Internal/External Auditing: Conduct regular internal/external auditing to ensure that the SCV system satisfies the PRA-DP 11.1 and 11.2 requirements are met.
- Risk Register Maintenance: Maintain a risk register to record the issues that arise during the SCV report generation process.
- Security and Compliance Check: Continuously ascertain compliance with ISO standards and FSCS regulatory requirements.
- Audit and Screening: Implement a process for auditing and screening to ensure more accurate and trustworthy customer information.
- Communicate and Engage: Develop channels for communicating and engaging with stakeholders during the audit process.
These steps are essential for ensuring the accuracy, completeness, and consistency of the SCV report and maintaining regulatory compliance.
What are the third-party integrations used for data validation?
The third-party integrations used for data validation in the generated Single Customer View (SCV) report include trusted databases maintained by independent organisations such as FCA DB, Royal Mail DB through API, Companies House, Charities Register, BFPO Address, OFAC Sanction customer check, and other databases.
How are the data sources integrated for SCV report generation?
- Aggregates data from various channels for diverse customer interactions, transactions, behaviors, and preferences.
- SCV Forza, an automated platform, integrates data sources seamlessly.
- Leverages AI-based fuzzy logic and multi-level data validation to prevent data duplication and ensure consistency.
- Facilitates account segregation management, linking related accounts and datasets.
- Enables generation of accurate SCV reports meeting FSCS compliance requirements.
What are all the data privacy and compliance standards followed by the SCV regulatory reporting tool?
The SCV regulatory reporting tool follows several data privacy and compliance standards to ensure a high level of data security and regulatory adherence. Here are the standards followed:
- ISO Standards
- FSCS Regulatory Requirements
- Strong Customer Authentication
- IP Restrictions for Admin Portal
- Microsoft Enterprise Grade Security
- Secure Data Capture
- Stringent Data Retention Policies
- Malware Protection
- Robust 256-bits Encryption
- Periodic VAPT (Vulnerability Assessment and Penetration Testing)
- 3D Secure Authentication
- Firewall Protection
How data is managed in the FSCS SCV Enterprise suite?
The SCV Enterprise Suite offers a fully automated data aggregation process, ensuring accurate and reliable data management.
- Uses AI-based fuzzy logic to prevent data duplication and generates accurate SCV reports for FSCS submission.
- Ensures data privacy and compliance by complying with ISO standards and FSCS regulatory requirements.
- Maintains a full audit history, allowing users to compare previous audits and track metrics for data remediation.
- AI-based algorithms identify potential issues, such as inaccurate customer and account holder information.
- Regular compliance checks ensure data reliability.
- The platform uses robust data security measures, including 256-bit encryption, malware protection, strict data retention policies, and firewall protection.
These measures safeguard stored data from unauthorised access and ensure its integrity.
SCV Alliance
FSCS SCV Audit Platform
