APRA’s Data Modernization Program Is Moving Full Steam Ahead: It Is High Time To Prepare

By: Jessica Qiu, Vice President, Client Engagement and Su Jean Song, Product Manager, AxiomSL Australia

Transitioning to more granular reporting is a focal point for Australian financial firms as the Australian Prudential Regulation Authority (APRA) proceeds at full throttle to implement a data modernization program.

data modernization

Dramatic Changes In Data Collection And Reporting

APRA embarked in 2017 on a data modernization program for the collection of Economic and Financial Statistics (EFS) and issued Reporting Practice Guide (RPG) 702 to ensure the quality of EFS data collection, published as the Monthly Authorised Deposit-taking Institution Statistics (MADIS). The objective is to ensure that APRA moves in tandem with advances locally and globally in data, analytics, and technology.

Based on APRA’s recent announcements and specific actions, Australian financial institutions need to be highly aware that the conversion to granular reporting will continue at a rapid pace.

One key step in this direction is the move away from form-based reporting to automated data collection. To that end, APRA chose an international consortium to develop a new data collection solution to be used by approximately 4,500 companies across Australia’s financial sector to meet their data reporting requirements. Plans for it to become operational in 2020 were temporarily suspended due to the COVID-19 crisis.

APRA’s new data collection approach will enable regulators to:

  • Take a more flexible approach to the types of data collected
  • Define requirements through data models, instead of through forms to reduce the reporting burden, while at the same time increase flexibility in the use of the data
  • Make changes to reporting requirements, as needed

Granular Data Is Also Required Under COVID-19-Related ARS 920

In another move pointing to more granular reporting, APRA has issued a new reporting standard for collecting data from financial institutions participating in the government’s Coronavirus Small and Medium Enterprise (SME) Guarantee Scheme. The government launched the scheme to help SMEs access vital funding to get through the impact of the COVID-19 pandemic by guaranteeing 50% of new loans issued by eligible lenders.

APRA’s new reporting standard, ARS 920, presents problems for some financial institutions in terms of data management on three fronts:

  • The challenge of producing loan data that is not required in the current EFS data set, such as additional security provided and guarantor details
  • The challenge of delivering a quick turnaround for the data – the first collection was due on May 1, 2020, for information as at April 17, 2020, and many organizations were caught off guard and had to source information manually
  • The challenge of implementing additional controls to ensure data is captured for the correct primary borrower and guarantor and that it is accurate and complete

Joining The Bandwagon

ARS 920 reporting may be only the beginning. For example, one area of focus is deferred payments, which have several repercussions on provisioning and, in turn, on capital held. Other Australian government bodies plan to follow the trend towards data modernization. For instance, the Australian Securities and Investment Commission (ASIC) have embarked on a program for collection of recurrent financial services data, with an initial focus on mortgage and managed flows data.

Capitalizing On The Changing Landscape

The data modernization program is presenting opportunities to increase efficiency in the financial sector. For example, the Royal Commission and the Productivity Commission are encouraging increased information-sharing between agencies, in particular between APRA and ASIC, and more efficient data reporting. And many organizations are designing data warehouses to better align their data sourcing with regulatory needs.

Preparing For The Future

With more granular data driving an increase in data volume, regulatory data management is becoming more important. Financial institutions will need to find ways to manage the balance between data granularity and confidentiality, for example, regarding personally identifiable information (PII) in the loan portfolio and in many other data sets. As such, they should consider implementing innovative technology that can enable them to successfully optimize compliance.

ControllerView®, AxiomSL’s data integrity and control platform, easily ingests disparate source data, enables data cleansing and validation, facilitates data masking for privacy compliance, keeps pace with regulatory changes, and provides dynamic data-lineage and tracing. Its solutions empower financial institutions to execute against changing regulatory requirements, leverage APRA’s taxonomy, and optimize their data management. With the ability to access accurate, transparent, granular data, firms are well positioned to withstand regulatory audits and queries, reuse their data for other regulatory needs, and gain insights to drive business growth.

AxiomSL rapidly evolves its solutions to fully accommodate APRA’s data modernization program and the regulatory transition to much more granular data, especially pertaining to financial institutions’ loan portfolios. Its solutions will be compliant APRA Connect, the new collection platform.

To be prepared for APRA’s regulatory data modernization program and EFS reporting, contact us today.

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