The “Dodd-Frank Wall Street Reform and Consumer Protection Act” has recently been passed by the US federal government to regulate financial institutions. Per this legislation, there will be more “watchdog” agencies that will be auditing banks, lending and investment institutions to ensure compliance. As an example, there will be an Office of Financial Research within the Federal Treasury responsible for collecting and analyzing data. This legislation brings with it a higher risk of fines for non-compliance.
How does this legislation affect the requirements of financial institutions to retain data for compliance to these regulations?
Data retention is the key in being able to provide accurate and timely reporting to the federal government to prove compliance. This legislation does not necessarily affect the amount of time that data needs to be retained, but rather expands the scope of data that needs to be retained. It is clear that significant amounts of consumer mortgage and lending data need to be earmarked for retention. Any institutions that need to borrow money from the federal government will be required to provide data supporting the need for the loan. They will also need to provide data showing how the borrowed money is used. The regulations are rather complex and speak to oversight of the lending markets and use of bailout money by any financial institutions with assets exceeding $10 billion. Financial institutions with over $10 billion in assets have a great deal of data to manage.
As the list of new regulations grows larger, the task of managing data retention becomes more costly and resource intensive. In order to comply with such regulations, these institutions should put a comprehensive enterprise level data retention management initiative in place to support compliance. This means that data from redundant systems acquired via M&A activity, or legacy systems should be archived and their systems retired. Retention policies should also be applied to live applications and the expired data archived. You can accomplish both retirement and live archive initiatives by using an archiving solution that automatically manages data retention policies, has a high compression ratio and provides quick and easy accessibility to the data. This will accomplish several things:
- This will maximize the amount of data under automated retention policy management and minimize the manual effort of managing its retention
- Minimize the cost of supporting this data
- Minimize the number of data sources to satisfy legal discovery
- Mitigate risk of steep fines for non-compliance
- Mitigate risk of steep fines for delayed legal response
While oversight legislation such as Dodd –Frank presents additional compliance cost and effort for the financial industry, the proper archiving solution for live systems and/or legacy/redundant systems can provide additional cost benefits beyond automating the compliance initiative that can add to your bottom line. High compliance ratio minimizes infrastructure requirements, retiring legacy/redundant applications removes application support and infrastructure costs. Once your archiving/compliance process is in place, responding to any new regulations should be a minimal tweak to the existing process.