08 Oct Decision to participate in ECB’s AnaCredit project presents many challenges for Swedish firms
October 8, 2015 – By David Attenborough, Business Development Manager, EMEA, AxiomSL
The years following the financial crisis have seen a massive increase in the amount of data that regulators demand from market participants, as they attempt to better understand developments in the market and identify risks. As part of this trend, financial firms in Sweden have become subject to new requirements to report on many aspects of their operations, including their liquidity and capital. Regulatory attention is now shifting to firms’ credit exposures, and the Riksbank has decided to implement significant new disclosure requirements that are being developed by the European Central Bank (ECB).
As part of its efforts to build a more in-depth picture of market activity, the ECB plans to establish a pan-European register of data about the credit exposures of financial firms. The Analytical Credit Dataset (AnaCredit) project, as it is known, will introduce new reporting requirements for financial firms, which will automatically be rolled out in all eurozone countries. Sweden is one of a handful of non-eurozone countries (including Denmark) that has also decided to implement AnaCredit.
The ECB is yet to finalize its requirements. However, it is already clear that the decision to implement AnaCredit in Sweden will create a number of challenges for firms here, which are already busy adapting to other recent regulatory changes.
For a start, the threshold for reportable exposures under AnaCredit will be low – the ECB is considering a threshold of just €25,000. This will mean institutions, such as private banks, that have not previously been impacted by similar requirements will now need to report on credit instruments, including loans, derivatives and off-balance-sheet exposures. The expected low disclosure threshold also means firms will need to submit reports on a large number of exposures.
The reports themselves promise to be challenging. Firms will need to report more than 140 data fields about their credit exposures at borrower level. The data referred to in ECB discussion papers includes items that are not currently needed for external reporting purposes. As a result, firms are unlikely to currently have all of the data that is required for AnaCredit. The data that firms do have will be distributed across different IT systems and spreadsheets.
A final challenge presented by AnaCredit is the frequency of reporting. The ECB is expected to require firms to report non-prudential data on a monthly basis and prudential data quarterly. This is an aggressive timeline for firms, which will be producing highly detailed reports on a large number of credit exposures.
How long have market participants got to prepare? Work is underway on the draft AnaCredit regulation, which is expected to be submitted for approval in October. However, the ECB published a provisional implementation timetable in April, which sets out its intention to phase in the reporting requirements from the end of 2017.
When faced with new regulatory requirements, banks in Sweden (and across the Nordic countries more generally) have historically built their own IT solutions. However, as so many new regulations have come into force in recent years, firms are increasingly looking to buy – rather than build – the technology they need to do their regulatory reporting. This trend looks set to continue with AnaCredit.
As they assess the technology they will need to do their AnaCredit reporting, there are a number of points that firms in Sweden should bear in mind. Firstly, given the similarities between the data needed for AnaCredit and other requirements – such as Common Reporting (COREP) and Financial Reporting (FINREP) – firms should look to use a single technology platform to manage their reporting for all of the regulations. This will enable them to avoid duplicate work, such as loading and processing the same data multiple times. It will also help to ensure consistency between the data in the different reports.
As much of the data that firms need for AnaCredit is likely to be maintained in different systems, they will need robust data aggregation and data normalization functionality to bring all of the data together and complete their reports. Firms should also consider whether the reporting system they intend to use will scale to accommodate the large number of reports that will need to be produced for AnaCredit.
The Riksbank’s decision to participate in AnaCredit has major implications for financial firms. As the ECB continues to work through the details of the requirements, it is time for firms in Sweden to start preparing for a new level of regulatory scrutiny.
This article was originally published in Sweden by Realtid.