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Data Management: The Heart of Financial Reform

As financial reform takes shape, new regulations that give the government the power to examine financial institutions' data are driving banks to modernize and standardize their data management capabilities.

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The overhaul of the United States' financial industry has begun. And while the Dodd-Frank Wall Street Reform and Consumer Protection Act, signed into law July 21, 2010, by President Barack Obama, represents multifaceted regulation that essentially reaches every component of the financial services industry in the United States, its implications on data management represent a mandate to improve infrastructure or risk being unable to meet the evolving requirements set forth by regulators.

The Dodd-Frank legislation establishes the Office of Financial Reform (OFR), a new department within the U.S. Department of the Treasury that is tasked with gathering and reporting to lawmakers information regarding potential risks and threats within the nation's financial industry. To accomplish this, the OFR's director can use his or her subpoena power to gather data from any financial institution.

Simply, says Michael Atkin, director of the Enterprise Data Management Council, a nonprofit trade association focused on managing and leveraging data, the regulation gives banks' corporate leadership a new opportunity to examine the growing problem of managing skyrocketing amounts of data and finally to budget appropriately to meet the challenge. "It kicked the practice of data management into high gear," Atkin says. "We're now set up for addressing the data dilemma that we have because we finally have a reason that is not subject to the whim of a business case. It is a regulatory requirement."

The OFR director, who has not yet been appointed, will make his or her report to Congress in 2012, adds Atkin. But that initial report, he notes, likely will be more on the state of the industry than a detailed analysis of its data, giving financial institutions a window of several years to prepare for potential requirements. "The implications from an infrastructure perspective are about getting the core building blocks of risk management in place," Atkin relates.

Changing Priorities

Financial institutions now will be required to operate with greater transparency, points out Frank Fanzilli, chairman of the RainStor Advisory Council, which provides guidance to the San Francisco-based data retention provider, and former managing director and global CIO of Credit Suisse First Boston. "The Dodd-Frank reform is just starting to take effect, and we will likely see many more IT changes evolve over the next few years to accommodate these external demands," he says.

"CIOs have been heavily focused on deploying solutions that focus on low-latency applications and web-enabled self-service capabilities, which have served the business well," Fanzilli observes. "Attention now needs to turn to the improvement of infrastructure and data management systems to provide the transparency that these reforms have mandated. If the IT division cannot efficiently store and retain their most critical asset -- data -- it will become extremely difficult to stay compliant, let alone stay in business."

Jane Griffin, an Atlanta-based principal with Deloitte Consulting, affirms that data management must become a top priority. "Historically, before regulation, we certainly saw a recognition of a need -- a need for cost reduction, a need for better customer management, risk management, financial management," she says. "Definitely the regulatory oversight and the level of confidence of management and different regulators has brought this to a board-level visibility like it's never had before."

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