APRA’s new reporting standards force a regtech rethink

The Australian Prudential and Regulation Authority’s (APRA) new requirements for reporting data is forcing banks to think about the adequacy of their technology systems

 

21 June 2017

An array of new Australian Prudential Regulation Authority reporting requirements has resulted in banks being encouraged by global technology vendors to rethink their data architecture and to prepare for a future requiring a better grasp of data lineage and traceability.

New York-based regtech pioneer AxiomSL, whose technology systems are used in three-quarters of the world’s top 100 banks, published a white paper on Wednesday on more demanding regulatory reporting requirements in Australia. This follows a roundtable AxiomSL hosted in Sydney last week, which was attended by 70 local bankers.

AxiomSL’s chief executive Alexander Tsigutkin said a global trend for more detailed information requests from banks would continue as regulatory scrutiny of the sector continues. He also predicted the more onerous rules introduced last year by the US Federal Reserve – requiring chief financial officers to provide personal attestations about the quality of data used by regulators in stress tests – would be adopted by other regulators around the world.

“Meeting such regulations can only be achieved through automation and banks will have to be able to demonstrate full lineage across data and processes,” Mr Tsigutkin said.

Founded 25 years ago, AxiomSL has been rapidly growing since the GFC; its earnings are growing by around 30 per cent a year but are not disclosed by the privately-held company, Mr Tsigutkin said.

AxiomSL, which has 70 staff in the Asian region and 650 around the globe, has been in Australia for six years. Two of the top five Australian banks are customers and it is looking to attract others. It hired former Deutsche Bank and Macquarie banker Andrew Wood to run Australian operations earlier this year.

Forefront of automation

Abraham Teo, head of AxiomSL’s regional regulatory policy team, said APRA is at the forefront of global efforts to push banks to automate reporting and is the only regulator in Asia to have developed an “extensible business reporting language” (XBRL) taxonomy to formalise reporting standards.

Upcoming reforms to APRA’s standards include the reporting of residential mortgage exposures to require banks to report a broader range of data, including portfolio breakdown of loan to value ratios, loan performance and serviceability metrics. These are expected to come into force at the end of this year.

Meanwhile, new reporting requirements for securitisation are expected take effect in January and banks will need to supply new agricultural lending data from the end of September.

APRA is also in the process of modernising the collection of “economic and financial statistics” (ESS) to meet requirements of the Reserve Bank of Australia and the Australian Bureau of Statistics, with a phased-in introduction of expanded reporting forms expected to begin in July next year.

APRA is also changing data reports for international exposures and planning a consultation on reporting of counterparty credit risk and, separately, large exposures.

“The Australian market and APRA is entering a huge cycle of change right now,” Mr Teo said. “The amount of data APRA is asking for is doubling. It is easy to put numbers in a box, but understanding why you are reporting that number, and what deals the number came from – that is the value we bring to our clients.”

This article was originally published by the Australian Financial Review.