Why It's Important: Regulators are demanding increased transparency and access to firms' data because of the near global financial meltdown precipitated by subprime mortgages and the derivatives activities of AIG, which weren't exposed to reporting requirements. "There has been a certain level of opaqueness to our financial system, and investors and market participants are all looking for transparency," comments Milton Miyashiro, head of regulatory compliance for evaluations at Thomson Reuters. "The reforms are designed to bring stability to the markets that have been running away through innovation." Firms will need to be able to provide access to data that is trustworthy, relevant and high quality, otherwise they could face penalties from regulators, including being held to excessive capital levels that are detrimental to the business, suggest experts.

Where the Industry Is Now: While there are too many proposed regulations to mention, every regulator has some reform or requirement that it wants to implement. The SEC is looking at rating agencies and dark pools and other market structure issues; the U.S. Treasury is looking at OTC derivatives transaction reporting, dark pool reporting standards, and registration by hedge funds and private equity firms, as well as compensation reporting by top bank executives. Meanwhile, FINRA (the Financial Industry Regulatory Authority) is looking to create post-secondary trade reporting for mortgage-backed and asset-backed securities. And in 2009 banks dealt with the Financial Accounting Standards Board's FASB 157, which forced banks to report the fair market value of CDOs and other complex debt securities on their balance sheets.

Focus in 2010: "Firms will invest in infrastructure and extractor tools to strengthen their data quality and all their different information systems and reporting systems to come up with clear and accurate data," says Miyashiro, who points out that "Basel II is going live, and it's no longer in its testing phase, so you're playing with live ammunition." Compliance with Basel II will impact the top 20 U.S. banks, and according to Miyashiro, regulators will require them to score their own assets and develop a model to compute the amount of capital they need to hold in reserve. Those institutions preparing for Basel II have to aggregate their historical data to determine their risk-based capital models, he notes.

OTC derivatives reform also will require banks to report their trades to some form of repository. "The reporting side is more meant to address non-cleared OTC derivatives," explains Kevin McPartland, senior analyst at TABB Group. "However, the cleared instruments should be in the repository as well."

And as industry consolidation continues, banks involved in mergers and acquisitions -- such as J.P. Morgan (WaMu), Bank of America (Countrywide) and Wells Fargo (Wachovia) -- will need to integrate and consolidate enterprise systems, licensing agreements, data farms and servers.

Industry Leaders: The too-big-to-fail banks (i.e., Citigroup, Bank of America, Goldman Sachs, J.P. Morgan, Morgan Stanley, Wells Fargo) that went through rigorous stress testing to assess their risk with the U.S. Treasury department already understand the scope of regulatory demands and the underlying reporting requirements/capabilities.

Technology Providers: There are a number of technology solutions that can help firms organize their data. The main players in the data management space are GoldenSource and Asset Control, while Sybase, Oracle and SAP are leading database solutions providers. "The products are out there, yet firms have been reluctant to hand their critical data over to a third party," says McPartland. "If that's the case, they'll [develop] enterprise solutions, and the data will sit on their site."

Companies such as Informatica provide frameworks for enterprise data integration that reaches into a plethora of systems, including mainframes and open source code, and can even run in a cloud. Messaging standards also will be required for data reporting. "FpML is a logical thought there for [derivatives] reporting," notes McPartland. Others point to XBRL, an XML-based standard that the SEC has implemented for financial reporting.

Price Tag: No one is willing to estimate the cost of developing an effective data management and reporting infrastructure, but experts agree that the investment required is substantial. "These are not trivial dollars," says Thomson Reuters' Miyashiro. "Now you really need to spend the money to go beyond best efforts.