The General Data Protection Regulation (GDPR) is a legal framework that sets guidelines for the collection and processing of personal information of individuals within the European Union (EU). The GDPR sets out the principles for data management and the rights of the individual, while also imposing fines that can be revenue-based. The General Data Protection Regulation covers all companies that deal with data of EU citizens, so it is a critical regulation for corporate compliance officers at banks, insurers, and other financial companies. GDPR came into effect across the EU on May 25, 2018.
The GDPR was adopted in April 2016 and adds to the EU’s general policy of protecting citizen’s data. In addition to the notifications of collection and legal ramifications for misuse, there is also a requirement to obtain explicit consent, notify in cases of a hack or breach, appoint dedicated data protection officers and much more. For financial institutions, the new rules will require significant investments in compliance to ensure continuing access to the EU market. The new rules are also pushing firms to pseudonymize personally identifiable information (PII) prior to processing it, meaning that the data can’t be attributed back to a particular person. The pseudonymization of data allows firms to do some larger data analysis such as assessing average debt ratios of its customers in a particular region — that would otherwise be beyond the original purposes of data collected for assessing creditworthiness for a loan.
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