The Financial Stability Institute, or FSI, of BIS published a paper on the regulatory reporting initiatives at 10 financial authorities that are implementing or have implemented innovations in regulatory reporting. These authorities are APRA, BDI, Central Bank of the Republic of Austria (OeNB), Central Bank of the Philippines (BSP), EBA, ECB, FCA, FDIC, National Bank of Rwanda (BNR), and MAS. The paper describes and compares the regulatory reporting initiatives in the covered jurisdictions and presents lessons learned from different regulatory reporting initiatives. The paper highlights that most authorities are standardizing the data needed to populate reports and/or requiring more granular data. In addition, half of these are modernizing the means of data transmission and a few are improving reporting formats or actively accessing data from financial institutions.
The paper describes a framework for looking at the key innovations that have taken place at key points in the regulatory reporting process. Using this framework, the paper further presents different regulatory reporting initiatives from these authorities. The paper highlights that innovations are enhancing the quality of regulatory data and setting the basis for achieving the ultimate objective of moving towards the concept of "data-sharing." However, authorities face a number of issues and challenges in the implementation of their regulatory reporting initiatives, with reconciling the different interests of various stakeholders and addressing legacy systems being the key challenges. Financial authorities are addressing these constraints by either tailoring the new reporting approaches to different types of financial institutions or providing financial grants or technical support to assist with implementation.
In terms of technology, the complicated process of disentangling closely intertwined legacy systems leads to a strong preference for the status quo, which in turn makes it challenging to get buy-in. Based on the experience of authorities covered in this paper, there may be certain preconditions for a regulatory reporting initiative to succeed. These include strong commitment and support from top management at both financial authorities and financial institutions, a well-defined centralized data strategy and data governance framework within financial authorities and the effective management of the transition to new regulatory reporting processes. While it is still not being actively pursued by financial authorities and may be viewed as aspirational, distributed ledger technology, or DLT, has the potential to fundamentally transform the way data is managed by replacing today’s practice of financial institutions keeping different records of the same transaction.
Looking ahead, while a shift to a “data-sharing” concept may take time, the trend toward more granular and integrated reporting is very likely to continue. For the “data-sharing” concept to become a reality, the right technology and data standardization are critical. However, the technology to implement this concept is still being developed. While data standardization is certainly attractive since it can significantly simplify the regulatory reporting process, implementing it on a wider scale raises financial, practical, and competition issues. Consequently, a widespread shift to the “data-sharing” concept is unlikely to happen in the near term. Many authorities have already started their journey toward more granular and integrated reporting and more will possibly follow. The implementation may take different forms. Larger financial institutions are expected to be subject to more data standardization, especially for reporting areas with cross-border elements in which data interoperability is important. Several initiatives toward data standardization are already underway at the regional (particularly in Europe) and international levels.
Keywords: International, Banking, Insurance, Securities, Reporting, Data Sharing, Granular Data, Integrated Reporting Framework, Statistical Reporting, Suptech, Regtech, FSI, BIS
The European Banking Authority (EBA) published four draft principles to support supervisory efforts in assessing the representativeness of COVID-19-impacted data for banks using the internal ratings based (IRB) credit risk models.
The European Council and the European Parliament (EP) reached a provisional political agreement on the Corporate Sustainability Reporting Directive (CSRD).
The Prudential Regulation Authority (PRA) launched a consultation (CP6/22) that sets out proposal for a new Supervisory Statement on expectations for management of model risk by banks.
The European Commission (EC) published the Delegated Regulation 2022/954, which amends regulatory technical standards on specification of the calculation of specific and general credit risk adjustments.
The Bank for International Settlements (BIS) Innovation Hub updated its work program, announcing a set of projects across various centers.
The European Insurance and Occupational Pensions Authority (EIOPA) published two consultation papers—one on the supervisory statement on exclusions related to systemic events and the other on the supervisory statement on the management of non-affirmative cyber exposures.
Certain members of the U.S. Senate Committee on Banking, Housing, and Urban Affairs issued a letter to the Securities and Exchange Commission (SEC)
The European Insurance and Occupational Pensions Authority (EIOPA) published a consultation paper on the advice on the review of the securitization prudential framework in Solvency II.
The Prudential Regulation Authority (PRA) issued a statement on PRA buffer adjustment while the Bank of England (BoE) published a notice on the statistical reporting requirements for banks.
The Basel Committee on Banking Supervision (BCBS) issued principles for the effective management and supervision of climate-related financial risks.