Financial regulatory agencies have fallen behind on joint data standards
Financial regulators are playing catch-up on establishing joint data requirements for industry reporting, but the congressional watchdog is offering some guidance that could lead to a true governmentwide standard.
In a report released Thursday, the Government Accountability Office sketched out how those agencies could approach compliance with the Financial Data Transparency Act — a December 2022 law aimed at harmonizing data-reporting rules for the private sector while boosting transparency.
Agencies covered by the FDTA include the Treasury Department, the Federal Reserve, the Securities and Exchange Commission, the Consumer Financial Protection Bureau, the Commodity Futures Trading Commission, the National Credit Union Administration, the Federal Deposit Insurance Corp., the Federal Housing Finance Agency and the Office of the Comptroller of the Currency.
Those regulators met the FDTA’s October 2024 deadline to issue a proposed joint rule, agreeing on the following requirements for industry data submissions: data should be fully searchable and machine readable; the standard should clearly define the data element and its relationship to other data elements; data should be consistently identified in accordance with its regulatory requirement; and the data standard should be nonproprietary or available under the open license.
Despite hitting that deadline, the covered agencies didn’t issue a final joint rule by December 2024; in fact, as of May 1, a final rule still had not been published, according to the GAO, which noted that the agencies are evaluating comments.
The watchdog didn’t offer official recommendations to the agencies, but it pointed to some of its past work on interagency collaboration and data governance — practices that it said could “guide regulators at such time as they should seek to build toward a government-wide regulatory standardization mechanism like” Standard Business Reporting.
SBR systems are often enacted to lessen burdens and streamline reporting across government. In the Netherlands and Australia, for example, “SBR is a standardized approach to online or digital recordkeeping that was introduced to simplify business reporting obligations,” the GAO stated.
Despite the U.S. not having a SBR, the watchdog said full compliance with the FDTA could put the country on a “path towards a government-wide reporting system” similar to it. Following the GAO’s prior work on data and cross-agency work could ease that transition.
But the watchdog reported that many of the covered agencies are facing implementation issues. For example, some said they haven’t conducted a cost-benefit analysis of the draft joint standards because “individual agency rules that will follow the joint rule likely would include benefit-cost analyses specifically tailored to the agencies’ individual circumstances.”
One challenge facing the financial regulators is the likelihood that they’ll need to modernize legacy data systems, in addition to coordinating across agencies and managing potentially high data governance costs. On the industry side, there could be costs for adapting processes to comply with the new reporting requirements.
But a final joint rule comes with plenty of benefits for all parties, the GAO said. Data interoperability is likely to improve the quality and efficiency of regulators’ data analysis, which could in turn lead to better oversight and quicker responses to compliance concerns, the watchdog wrote.
Once the agencies have finalized their joint data-reporting rule, the GAO believes “more may be known” about the consistency of the regulators’ data standards. Reaching the end goal of governmentwide data standards, it said, “can take a considerable period of time.”
“The success of efforts to expand beyond the FDTA may depend, in part, on adherence to these key data governance practices and principles,” the GAO concluded.
