The global regulatory landscape is undergoing a significant transformation, characterized by a transition to data-driven oversight and stricter compliance standards. While financial institutions may feel burdened by the increasing demand for detailed, frequent, and extensive data by regulators, this shift is aimed at strengthening regulatory capabilities to identify and mitigate systemic risks, monitor market activities, and maintain the stability of financial systems.
Amidst the myriad changes and proposals, there is a notable uptick in regulatory emphasis on granular data reporting. This momentum is propelled by both the escalating expectations of regulators and the ongoing advancements in data management technologies. It is foreseeable that more regulatory bodies will adopt detailed data reporting frameworks as they recognize the benefits of robust data-driven oversight. Furthermore, reporting requirements are expected to evolve towards greater comprehensiveness and sophistication, encompassing a wider range of data points and reporting frequencies.
Drivers of granular data reporting
Regulatory authorities have been investigating alternative methods to replace conventional template-driven, consolidated regulatory reporting with granular data and digital reporting systems. The envisioned shift towards regulatory reporting utilizing granular data eliminates the necessity for numerous templates, empowering regulators to continuously repurpose shared data points for various analytical purposes.
- Enhanced regulatory oversight: Regulatory authorities require deeper insights into the financial system to proactively identify and address potential risks. Granular reporting facilitates this by providing a more comprehensive and detailed view of financial institutions' activities.
- Improved data quality and consistency: Traditional reporting methods often suffer from inconsistencies and data quality issues. A granular data reporting approach standardizes data formats and definitions, ensuring greater accuracy and facilitating efficient analysis by regulators.
- Reduced reporting burden: By streamlining data collection and aggregation processes, granular reporting potentially reduces the overall reporting burden for financial institutions, leading to increased operational efficiency and cost savings.
- Technological advancements: Advancements in data management and reporting technologies, such as cloud computing and data vaulting, are enabling the efficient implementation and scalability of these initiatives. Moreover, regulators are increasingly harnessing artificial intelligence (AI) to enhance their oversight capabilities. AI is being utilized for various tasks including the analysis of extensive data sets to identify patterns of non-compliance, the automation of regulatory reporting procedures, and even the anticipation of potential risks within regulated sectors. These AI-driven applications not only streamline regulatory operations but also foster a more proactive and efficient approach to regulatory oversight.
Regulations in flux
As regulators worldwide prioritize granular data reporting, each region and jurisdiction has established distinct approaches and timelines to address this need. These regional initiatives highlight a significant shift towards data-driven regulatory reporting practices.
Asia-Pacific
- Thailand RDT: Thailand's Regulatory Data Transformation (RDT) initiative, mandated by the Bank of Thailand, mirrors Europe's AnaCredit framework in its approach. Originally enforced for financial institutions in 2020, RDT's scope was expanded in January 2024 to include Non-Bank Financial Institutions (FBGs). The implementation strategy follows a phased approach, beginning with credit reporting in 2020, with subsequent phases aimed at FX, derivatives, payments, and securities. The rollout commenced with credit reporting for financial institutions in July 2023, with plans underway to extend this framework to FBGs by 2025.
- Australia Comprehensive Data Collection: Comprehensive Data Collection (CDC) represents APRA's initiative aimed at modernizing data collection methods from regulated entities. This initiative involves transitioning from aggregated reporting to table-based reporting, providing a more comprehensive and detailed approach. The transition is expected to occur gradually over a period of five years or longer, encompassing the entire financial services industry. Notably, this refined data collection process will be implemented iteratively through APRA Connect. The regulatory framework is still in its initial stages of development, with APRA planning to initiate industry consultations in early 2025 which will be followed by the process of designing and developing solutions.
- HKMA GDR: GDR (Granular Data Reporting) is HKMA's implementation of granular table-based data collection initiatives. Launched as a pilot program in 2019, it initially covered two data areas: Residential Mortgage Loans (RML) and Corporate Loans (CL). The program's second phase began in early 2021, introducing two additional data areas: Interbank Loans and Deposits (IBL) and Debt Securities Held (DSH). There were also revisions for RML and CL. The third phase commenced in Q3 of 2021, expanding the list of participating banks in Hong Kong. Throughout 2022 to 2023, there were multiple revisions to GDR, encompassing revisions to data fields, validation rules, and reconciliation with HKMA's form-based reports.
As of the latest version, released in April 2023, there are ten reporting data blocks for RML, nine for CL, four for IBL, and two for DSH. Initially, GDR submission was through two basic methods: email submission or via the Pilot GDR System. Although still in operation, these methods are slated to be replaced by the Common Submission Platform (CSP), a portal introduced by HKMA in Q3 of 2023 for Authorized Institutions to submit GDR data. Participants in Hong Kong's GDR will transition to CSP for submission starting March 2024.
- China: China's financial sector relies on various reporting frameworks, including those established by regulatory bodies like the China Banking and Insurance Regulatory Commission (CBIRC), China Securities Regulatory Commission (CSRC), and People's Bank of China (PBOC). These frameworks mandate financial institutions to report data related to their operations, risk management, and compliance.
- India: The Reserve Bank of India (RBI) is exploring the implementation of a granular data reporting framework aimed at improving its oversight of the financial system. Pilot programs are underway to assess and evaluate feasibility and effectiveness within the Indian context.
- Singapore: The Monetary Authority of Singapore (MAS) in 2018 envisioned a journey leading up to zero data duplication by sourcing granular data from the bank systems. They made some headway with MAS610 and Top Borrower Group Survey amendments but are yet to conclude the vision.
- Malaysia: Bank Negara Malaysia (BNM) is considering the implementation of a GDR framework as part of its ongoing efforts to enhance regulatory oversight and promote financial stability.
Europe & UK
- AnaCredit: The European Central Bank (ECB) launched AnaCredit in September 2018, aiming to compile detailed information on enterprise bank loans in the Euro area. The analytical credit datasets or “AnaCredit,” is designed to allow a better understanding of monetary policy, particularly regarding small and medium-sized enterprises.
- BECRIS 2.0 in Belgium: Beginning January 2024, the Belgian National Bank (NBB) is integrating the existing Central Individual Credit Register (CICR) with BECRIS, their existing system. While the information on corporate credits (AnaCredit) has been part of BECRIS reporting since 2016, the NBB will now expand BECRIS to replace the current CKP/CCP application.
This integration is a component of the NBB's initiative to modernize its overall credit data collection system. BECRIS Individual Credit Reporting (ICR) will now encompass institutions issuing credit contracts to individuals. The previous IT infrastructure had become inadequate for today's requirements and lacked coverage for the extended data needs outlined by the NBB. Consequently, the NBB is transitioning credit data collection and consultation to a unified platform, BECRIS 2.0.
- Finland positive credit register: Finland is about to roll out the positive credit register. As of April 2024, the register is to gather information on credits issued to Finnish individuals. Reporting agents are to deliver granular loan contract data to the register. This initiative enables the Finnish regulator to better monitor individual debt, assess creditworthiness and collect reliable information on the credit market.
- Bank of England (BoE) Supervisory Reporting: The BoE requires banks to submit granular data on various aspects of their operations, including exposures, transactions, and risk management practices.
- Solvency II: The Solvency II directive for insurance companies in the European Union (EU) necessitates granular reporting on risks, capital adequacy, and solvency positions.
Navigating a complex and evolving landscape
Implementation of granular or digital reporting changes is not one-dimensional and poses several challenges to financial institutions.
- Complexity in data management: The task of collecting, storing, and effectively managing vast amounts of granular data demands robust data governance frameworks and efficient data management infrastructure.
- Technological investments: Financial institutions embarking on such initiatives must make substantial investments in implementing and maintaining technology solutions to support these efforts.
- Regulatory uncertainty: The ever-evolving regulatory landscape and varying interpretations across jurisdictions can breed uncertainty for institutions navigating the complexities of compliance.
- Skill Management: Adequately allocating financial, technological, and human resources to comply with regulatory initiatives is a formidable task. Compliance requires continuous monitoring, evaluation, and improvement, necessitating ongoing investment in resources and staying abreast of regulatory changes and best practices, which can prove challenging.
Taking a strategic approach to implementing granular reporting
Financial institutions may opt for in-house expertise to address immediate regulatory needs with a tailored solution. However, this approach may falter in keeping pace with evolving regulations and prove unsustainable.
Collaborating with an experienced partner ensures access to robust expert RegTech solutions, equipped with pre-built frameworks and out-of-box features and functionalities that banks and financial institutions need. This provides flexibility, scalability, and seamless integration into existing workflows. Accenture reports that institutions utilizing RegTech solutions for regulatory reporting saw a 30% cost reduction and a 50% decrease in errors.
RegTech solutions enable real-time compliance by continually monitoring and integrating regulatory updates. Alongside advanced analytics and reporting capabilities, they offer insights into compliance status and areas for improvement, streamlining processes, and enhancing operational efficiencies by up to 40% with a 20% boost in data quality.
Getting your systems and processes ready for granular data reporting is an opportunity to optimize risk management practices and gain deeper insights by accessing richer data sets. Act now to unlock the full potential of granular data reporting for your institution's success.
