Attention: You are using an outdated browser, device or you do not have the latest version of JavaScript downloaded and so this website may not work as expected. Please download the latest software or switch device to avoid further issues.
| 12 Sep 2022 | |
| Written by Data Foundation | |
| Press Releases and Statements |
The American public relies on good information to make decisions about what products to buy at the grocery store, for purchasing or renting a home, and for understanding what characteristics of a car meet individual needs. Investment decisions on Wall Street are no different – reliable and clear information is needed in the marketplace to make good financial decisions. Government too is no exception - reliable, high quality financial information allows decision makers to develop and executive on sound policies that benefit the economy.
Today, the ability for companies, government, and the American people to access data about regulated firms across the country is limited by an arcane regulatory reporting infrastructure. The Financial Data Transparency Act (FDTA) co-sponsored by Senators Mark Warner (D-VA), Mike Crapo (R-ID), and Chuck Grassley (R-IA) takes on this problem by improving the reporting infrastructure for regulated firms to improve accountability. This bill has clear benefits for the American public, investors, government regulators, and private sector firms.
Why do we need to modernize our financial data?
These bills respond to recommendations provided by the U.S. Treasury Department in a 2017 report regarding reduction of regulatory overlap and duplication for banks and credit unions. The report, in response to an Executive Order on principles for regulating the financial system (E.O. 13772), calls for improved data sharing and reductions in reporting burdens and duplication.
The Financial Data Transparency Act addresses longstanding data deficiencies in regulatory reporting. The bill would require the seven of the financial regulatory member-agencies of the U.S. Financial Stability Oversight Council to adopt and apply uniform data standards (i.e. a common data format) for the information collected from regulated entities. As a consequence, the data standards will enable better information processing, software-enabled filing preparation, and data reconciliation. These features collectively are the basis for retail investors, regulators, and the market having better information for selecting investment opportunities and understanding risks.
How will the Financial Data Transparency Act help the government operate more efficiently?
The Financial Data Transparency Act establishes a framework that can be used to improve regulatory reporting efficiency in coming years, reducing compliance overhead and the level of effort required for submitting financial reports. It also sets the stage for financial regulators to have access to higher quality data so they can spend their time focused on enforcement rather than tracking down inadvertent errors in reports. Streamlining regulatory reporting frees up valuable time and energy that can also support private sector innovation and productivity growth.
Why does the legislation require open data standards?
The FDTA reiterates the requirement for disclosable public data assets to be made available as open Government Data assets, per the Foundations for Evidence-Based Policymaking Act. This assures the data assets published under the regulatory authorities of the FDTA’s covered agencies are presented in a manner consistent with existing government-wide data policy.
Open data standards allow for better information processing, software-enabled filing preparation, and data reconciliation. These features collectively are the basis for retail investors, regulators, and the market having better information for selecting investment opportunities and understanding risks. The FDTA includes a set of required characteristics which builds upon industry and technology best practices, accounts for lessons learned from existing federal regulatory standard setting, and incorporates relevant federal policy and international standards definitions.
The data will be made available under “open license” format which will reduce barriers for industry, academia, and others to incorporate or reuse the data standards and information definitions into systems and processes. This requirement will also facilitate competition among multiple vendors for creation, data collection, and analysis tools, which reduce long-term costs.
Does requiring open data standards mean there will be universal reporting requirements?
No. The FDTA does not impose new data collection or reporting requirements, and does not require agencies or regulated entities to collect or make publicly available additional information.
Will FDTA’s requirements mean that regulated entities need to adopt a specific software or other technology?
No. Open data standards can actually help facilitate technological innovation by reducing barriers for industry, academia and others to create new tools, such as artificial intelligence and machine learning applications. FDTA does not impose any technological mandates and regulated entities would continue to independently choose their software and technological solutions.
Will the FDTA requirements be difficult for regulated entities to adopt?
In order to reduce the burden on smaller regulated entities, the FDTA provides agencies with the flexibility to scale data reporting requirements in order to reduce burdens on smaller regulated entities and minimize disruptive changes to those affected by regulations. The data standards required by FDTA leverage existing, industry-accepted data formats and definitional standards. The standards connect with existing accounting standards to allow regulated entities to leverage expertise and processes established by the accounting, audit, legal, and regulatory compliance workforce, without imposing undue new burdens or costs.
How does the Financial Data Transparency Act relate to the Financial Transparency Act?
The Financial Transparency Act (H.R. 2989), cosponsored by Reps. Carolyn Maloney (D-NY) and Patrick McHenry (R-NC), is substantively very similar to the FDTA with common requirements, scopes, goals, and timelines. The bills differ in the process used to implement rules, with the FDTA establishing a joint rulemaking process for improved coordination across federal financial regulators. This coordinated process reduces the burden on regulated entities participating in regulatory processes for establishing standards and enables greater coordination – at the expense of the government – for engaging with stakeholders and responding to concerns that may be raised in future standard-setting activities.
The House-proposed FTA passed the U.S. House of Representatives with a strong bipartisan vote of 400-19 on October 25, 2021. It passed the House a second time in 2022 as part of the National Defense Authorization Act.
Has the Data Coalition taken a position on the Financial Data Transparency Act?
Representing members from the data analytics, technology, and management fields, the Data Coalition endorsed the current version of the Financial Data Transparency Act in the 117th Congress. The Data Coalition also previously endorsed the related Financial Transparency Act in the 114th, 115th, 116th, and 117th Congresses. These bipartisan pieces of legislation address the significant underlying data challenges that contribute to burdensome and ineffective financial regulation.
What other organizations endorsed the Financial Data Transparency Act or the related Financial Transparency Act?
Other transparency organizations and financial firms quickly endorsed versions of legislation:
