RegTech (short for Regulatory Technologies) aims at providing time-efficient, configurable and reliable regulatory solutions for businesses. A few years ago, complex Excel spreadsheets were needed to process compliance-related issues. Today, young and emerging RegTech companies offer software solutions addressing regulatory requirements in a simple and efficient manner and support and document their implementation. Following the implementation of MiFID II / MiFIR regulations, RegTech companies gained considerable attention in the financial community. One of these companies is the Frankfurt Main Finance member Compendor. Elmo Olieslagers, founding partner of Compendor, shares his insight into the world of an upcoming RegTech company in an exclusive interview!
What led to the founding of Compendor? Were there any specific triggers that led to the launching of the company?
MiFID II / MiFIR became effective on January 3rd, 2018 and being comprised of 7,000 pages, the legislative framework is not always easy to apprehend.
In order to implement MiFID II / MiFIR a client required a structured, detailed and pragmatic gap analysis. At the time, law firms offered gap analyses in – often not structured and still complex – Excel spreadsheets. In other words, it was not always clear to clients what the specific requirements were that needed to be fulfilled unless they hired law consultants. This was one reason why one client asked us to come up with a solution. Our solution combines the knowledge and expertise of lawyers, bankers, and compliance specialists into an online application. Using structured decision trees as a basis, we established an innovative way of mastering regulatory changes by Financial Institutions.
In the meantime, we service clients around the most important regulations concerning Investor Protection and GDPR for banks.
Where does Compendor fit into the RegTech eco system?
To answer that, let us take into account the typical actors and typical solutions along the lines of a generic Regulatory Response Process.
The Regulatory Response Process typically consists out of three steps:
- “Signaling” of a regulatory requirement and a first quick scan for impact
- “Implementing” a detailed gap analysis and corresponding solutions
- “Monitoring” for compliance on a continuous and detailed basis
Various German banking associations and law firms already provide “Signaling” solutions. We provide the solution for “Implementing & Monitoring” regulatory compliance. The main difference is that a more detailed level is required to conduct high-quality compliance monitoring.
Why should an asset manager/banks consider using your solution?
We see that many asset managers and smaller banks do not have the capacity nor the knowledge to keep up with all the new regulations. And even if they succeed in dedicating (available and trained) resources to a certain legislation, this is often concentrated within one or only a few employees. This results in concerns regarding continuity. How do you deal with key-people leaving or being unavailable for a longer time?
Our solutions can help organizations with addressing these issues. By using our RegTech solutions, knowledge is secured and less resources are needed to cope with the regulatory burden.
Compendor in 3 sentences. What makes Compendors Compliance Monitoring Solutions so successful?
- Knowledge is secured. Both with regards to the regulation as well as to the interpretations made during the implementation process (full audit trail)
- Always up-to-date with the latest status of regulations
- Resource (and cost) friendly, by using technology rather than human resources
What are currently the biggest challenges for RegTechs in the financial industry?
To fully capture the benefits RegTech can bring, a shift of business consciousness is required.
- Accept that regulation is a hygiene factor, not a strategic differentiator
- Ensure that legal and compliance departments accept technology as an opportunity
- Embed industry best practice solutions instead of in-house developments which often are cost and time intensive and do not incorporate industry-wide knowledge
- Adopt a unified, value-chain based approach, instead of fragmented autonomy of business lines and entities
Why is Frankfurt the ideal location for (FinTech) start-ups?
Frankfurt is becoming more important in the European financial landscape. More Banks and other financial institutions settle in Frankfurt, resulting in a huge demand for financial and regulatory expertise. This scarcity of financial/regulatory resources functions as a catalyst for alternatives like FinTech/RegTech.