RegTech Applications Architecture in Financial Holding Companies – A Chinese Perspective

regtech

By FINTECH Books Contributor, Yawei Cui
Follow: @CuiYawei

The scope of financial services licenses in mainland China includes seven core licenses (Banking, Securities, Insurance, Trust, Futures Broker/Dealer, Mutual Funds, Financial Leasing), plus five peripheral ones (Public Fund Subsidiary, Fund Sales  Distribution, Third Party Payment, Small Loans, Pawn). The financial services regulatory bodies in China, usually referred to as “One Bank and Three Committees” (People’s Bank of China, China Banking Regulatory Commission, China Securities Regulatory Commission, and China Insurance Regulatory Commission) still remain vertical and specialized, affording virtually no chance for information sharing or cross-oversight between the three pillars of the modern financial services industry.

At least 53 major Chinese state-owned enterprises and private conglomerates aspire to become financial holding companies with the capability of offering a complete suite of financial products and services. However, to provide cross-subsidiary compliance, internal oversight, regulatory reporting, and an enterprise-wide data framework which maximizes data and analytics sharing among subsidiaries, it is imperative to have RegTech applications in a consolidated architecture.

We argue that the core of the architecture should be a private enterprise cloud which provides data storage, analytics, and reporting capabilities with proper Chinese-wall restrictions between subsidiaries. The customer on-boarding may then originate from any subsidiary and undergo the shared KYC (Know Your Customer) and AML (Anti-Money Laundering) processes. A 360-degree customer portrait would be generated and continuously updated by the cloud and used across subsidiaries. Each subsidiary’s specific regulatory obligations and processes, as build-in modules, would be maintained by the cloud with automatic updates from regulation changes. This will greatly help financial holding companies satisfy regulatory requirements, thus improving the level of synergy across the whole company.

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