Regulatory Compliance for Financial Institutions: Best Technology Strategies

In the financial industry, current and pending major regulatory updates are reshaping how banks manage capital, liquidity, and risks. Although the upcoming regulations aim to enhance financial stability, they also force institutions to rethink their strategies, making regulatory compliance for financial institutions more complex and urgent. 

As a leader of a technology consulting company with extensive experience in financial services, I've seen firsthand how regulatory changes continually reshape the way banks manage risk and compliance. The latest examples are Basel 3.1 in the U.K. and Basel III Endgame in the U.S., which introduce stricter requirements that will redefine capital allocation, risk assessment, and reporting for banks. To navigate these challenges, financial institutions must adopt technology-driven solutions to strengthen risk management, streamline reporting, and optimize capital efficiency.   

Keeping up With the Changing Banking Regulatory Landscape 

In the U.K., The Prudential Regulation Authority (PRA) has outlined new standards for credit risk, capital requirements and reporting, with implementation set to begin on January 1, 2027, and a full transition deadline of January 1, 2030. 

Meanwhile, in the U.S., Basel III Endgame regulations are planned to take effect on July 1, 2025, with a three-year phase-in period concluding on July 1, 2028. These regulations will introduce higher capital buffers, revised risk-weighted asset (RWA) calculations and stricter risk assessment frameworks for larger banks. 

As both the U.S. and the UK continue to promote a digital development strategy for 2024-2030, which includes advancements in digital identification systems, trust, and privacy, banks’ technology teams must focus on modernizing their infrastructure and enhancing regulatory processes. With Basel 3.1 implementation delayed in the UK and Basel III Endgame phasing in gradually, financial institutions have a crucial window to leverage technology to ensure they’re compliant-ready. 

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Improving Credit Risk Calculations Through AI 

Meeting new regulatory compliance demands is a must and risk assessment using AI in banking makes it easier. Basel 3.1 introduces a 85% risk weight for unrated corporate exposures, reshaping capital allocation. Similarly, U.S. regulations require higher capital buffers across asset classes, increasing the urgency for precise, AI-driven risk analysis. 

Banks with large lending portfolios must rethink capital allocation strategies, especially for SME exposures, as new regulatory requirements tighten. AI-driven risk models are becoming essential to support regulatory compliance for financial institutions and improve capital planning precision. 

Integrating real-time market data and predictive analytics in banking can automate risk assessments, reduce manual workloads, and maintain compliance without adding capital strain. 

Simplifying Risk-Weighted Asset (RWA) Calculations with AI & Automation 

In the UK, Basel 3.1 introduces an output floor, requiring banks to use internal models to maintain RWAs at no less than 72.5% of those calculated under the standardized approach. This aims to reduce excessive RWA variability and enforce greater consistency in capital calculations. 

To ensure compliance, technology consultants can support banks in adopting AI-powered financial automation to enable real-time RWA comparisons, monitor capital adequacy, and automate key adjustments. AI in banking analysis supports more accurate capital planning and sharper IT compliance by forecasting the effects of regulatory changes and minimizing capital shortfall risks.  

Additionally, rather than relying on manual recalibrations, technology consultants can help banks integrate advanced risk modeling tools to ensure compliance and proactive capital management. 

Optimizing Liquidity Resilience Through Technology

Although Basel 3.1 does not directly revise the liquidity coverage ratio (LCR), the PRA is reviewing liquidity risk frameworks, signaling likely refinements to stress-testing and liquidity management requirements. Similarly, U.S. regulators are intensifying liquidity stress scenarios under Basel III Endgame, increasing the demand for real-time liquidity monitoring. 

Yet many banks still depend on outdated banking technology, including batch processing systems, which force risk teams to work with delayed data during periods of market volatility. This often results in fragmented liquidity reporting, manual stress-testing processes, inconsistent scenario modeling, and slower responses to emerging risks. 

Modernizing Legacy Risk Infrastructure for a Major U.K. Bank 

An example from Accedia’s experience modernizing legacy systems comes from one of the top U.K. banks. Aiming to accelerate risk decision-making and strengthen regulatory compliance, the bank needed to overcome long-standing bottlenecks caused by outdated systems and fragmented reporting. 

To develop a solution that matched both their risk and reporting needs, we worked closely with risk managers and operational teams, asking critical questions such as: "When are reporting delays most frequent?", "Which manual tasks create inconsistencies?", "How quickly do you need risk visibility to make informed decisions?", and "How does your current setup limit timely responses?" 

This deep research phase guided the design and implementation of an AI-powered risk platform that replaced static reports with dynamic, real-time dashboards. The solution provided risk teams with continuous liquidity visibility, streamlined scenario modeling, and enabled faster, data-driven responses to emerging risks. 

Key results included: 

• 20% improvement in real-time risk monitoring accuracy 
• 30% reduction in stress-testing time 
• Faster and more reliable reporting cycles 
• Stronger compliance readiness 

Reducing Operational Risk with Real-Time AI Solutions 

Although some regulations simplify operational risk capital calculations, they also may require stronger real-time risk controls to detect vulnerabilities early. The removal of the Internal Loss Multiplier (ILM) for banks using the Standardized Measurement Approach (SMA) may simplify operational risk calculations but also increases the need for proactive risk monitoring. Without ILM-driven adjustments, banks’ technology teams must enhance their real-time risk controls to detect vulnerabilities early. 

In similar cases, technology consultants can support financial institutions by implementing AI-powered fraud detection, predictive risk analytics, and real-time monitoring systems. Understanding the intricacies of different regulations allows consultants to develop tailored risk management frameworks that reduce complexity while strengthening financial resilience. 

Improving Stress Testing with Predictive Analytics 

Software consultants can help banks align their stress-testing methodologies with PRA-defined frameworks to assess their resilience against economic downturns, liquidity shocks, and market disruptions. Stress tests are essential for evaluating whether banks have adequate capital buffers to weather financial shocks. However, many institutions still rely on legacy systems and fragmented data environments, which hinder the integration of advanced analytics and robust data quality management practices. These outdated technology infrastructures make it difficult to access timely, accurate, and complete data, limiting banks' ability to capture real-time risk exposures and weakening the overall effectiveness of their stress-testing efforts. 

This is where predictive analytics and machine learning come in, enabling banks to simulate market shocks with far greater accuracy. Instead of relying on static models, software consultants can help financial institutions anticipate liquidity vulnerabilities, giving them an edge in risk management. As a result, they can proactively adjust their strategies and maintain adequate capital buffers before financial disruptions arise. 

Looking Ahead to the Future of Technology in Regulatory Compliance 

Navigating evolving regulations requires a proactive, technology-driven approach. Regulatory compliance for financial institutions now depends on advanced solutions that strengthen risk oversight, accelerate reporting, and support real-time decision-making. 

As Basel 3.1 and Basel III Endgame introduce tighter requirements, the role of clear technology strategy in closing data gaps and digitalizing compliance is constantly growing. 

Contact us to explore how Accedia supports digital transformation in finance — from modernizing outdated systems to building scalable, future-ready tech. 

This article was originally published by Dimitar Dimitrov, Managing Partner at Accedia, as a contribution to the Forbes Technology Council.