EC published results of the fitness check of supervisory reporting requirements in financial services legislation in EU. The fitness check is a follow-up to the feedback received in the EC Call for Evidence and in a number of sectoral legislative reviews. The results show that the supervisory reporting rules, which have been put in place since the financial crisis, have been effective in delivering the necessary data. However, the assessment shows that reporting is not as efficient as it could be. The fitness check suggests a comprehensive approach by EC and the relevant stakeholders to further streamline the requirements and develop a supervisory reporting that is fit for the future.
The results highlight that there are inconsistencies between reporting rules, which not only increase the administrative burden for financial institutions and other market participants but also reduce the quality and usability of the data for supervisors. Additionally, the recent trend toward data-driven monitoring and advances in data technology will require more high-quality and granular data going forward. Targeted improvements are under way and even completed in some cases. The fitness check also highlights the need for a comprehensive approach by EC and the relevant stakeholders. This will require improvements in different areas, including the following:
- Legislative process and instruments. There is scope for improving the design of primary (Level 1) legislation, including the need for clear and consistent empowerment for ESAs to develop the necessary technical standards in secondary (Level 2) legislation and for better consideration of implementation timelines.
- Data needs and uses. There is a case for further review of what data supervisors actually need, for what purpose, and what data they already have access to. More feedback and better communication on the purposes and actual use of the data, insofar as feasible and compatible with the nature of supervision, could help address concerns that supervisors request data that is "nice-to-have" as opposed to necessary and actually used.
- Consistency and harmonization. In addition to common definitions and terminology, there is a case for greater use of standards, including for identifiers and data formats. Consistent definitions and standards enhance comparability, communication, and streamlined processes, both within firms and with supervisors, facilitating automation and reducing the costs related to data collection and analysis. There is also scope for improving the interplay between EU and national reporting, given industry concerns about flexibility in national implementation and additional national reporting requirements.
- Governance. There is scope for more coordination and cooperation between stakeholders, from the early design phase through to data sharing between authorities.
- Technology. Although alternative solutions are not yet sufficiently advanced to replace the current supervisory reporting system on an EU-wide basis, technological developments (increasingly referred to as regtech and suptech) provide new opportunities to collect, transmit, access, and process large amounts of data more efficiently and effectively. However, new data technologies also place new demands on the design of future supervisory reporting.
Overall, this fitness check concludes that EU-level supervisory reporting requirements as a whole are broadly effective, highly relevant, and bring EU value added. Nonetheless, a number of issues in the development process, adoption, setup, and implementation of these requirements reduce their efficiency and coherence and impair the quality and usability of the reported data.
Keywords: Europe, EU, Banking, Insurance, Securities, Reporting, Fitness Check, Call for Evidence, Governance, Data, Regtech, Suptech, EC
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