Deposit Guarantee Scheme Directive (DGSD) Reporting Is A Data Headache For Financial Institutions

Deposit Guarantee Scheme Directive Reporting Is A Data Headache For Financial Institutions

As the COVID-19 crisis takes a toll on the economy and raises concerns about financial security among both individual deposit holders and financial institutions, the pressure is on firms to gear up their data management and reporting processes to comply with the new Deposit Guarantee Scheme Directive expansion. The regulation’s recent changes mean that complex Deposit Guarantee Scheme Directive reporting requirements will soon need to be met by financial institutions across Europe — even as many struggle with what a post-COVID-19 new normal might look like for their business processes.

Requirement Enhancements Intend To Provide Clarity

Enacted in 2014 by the European Union, Deposit Guarantee Scheme Directive was intended to harmonize and simplify the rules pertaining to protected deposits, speed up pay-outs, and improve the financing of direct guarantee schemes across member states. Under the directive, the level of deposit protection in the EU is set at 100,000 euros or 85,000 pounds and is guaranteed irrespective of any other deposit guarantee scheme a country may be signed up for. Deposit Guarantee Scheme Directive member states are required to raise available financial means for their deposit guarantee scheme funds equal to at least 0.8% of covered deposits (the target level may be reduced to no lower than 0.5% as an exception). The scheme contributions are based on the amount of covered deposits that the financial institutions within a member state may hold, and the degree of risk incurred by them.

But Reporting Is Not Cut And Dry

While Deposit Guarantee Scheme Directive reporting began in 2016, the European Banking Authority (EBA) has recently put forward framework proposals intended to strengthen depositor protection, enhance financial stability and reinforce financial resilience of deposit guarantee schemes. Deposit Guarantee Scheme Directive reporting involves many layers of reporting, which are likely to be burdensome and costly — at a time when institutions are already stretched. Financial institutions will need access to and visibility into their data to meet the expanded reporting requirements in a timely manner. They will likely have to accommodate challenges regarding siloed data, manual processes, and complex calculations in order to be fully compliant, particularly when operating across multiple jurisdictions. To comply at both the EU and national levels, firms will need to:

Deposit Guarantee Scheme Directive

  • Identify eligible entities and their deposits
  • Aggregate data from disparate sources
  • Minimize manual processes
  • Validate data to be included in reporting by customer and jurisdiction
  • Calculate eligible and covered amounts by creating a single customer view (SCV)
  • Meet requirements across jurisdictions prescribed by both the EU and national competent authorities (NCAs)

 

Lastly, successful submission requires firms to meet NCAs’ various required formats, which are often quite different from those mandated at the EU level.

Are There Potential Benefits Of This Headache?

One major impediment to this process will likely be siloed data across an organization, particularly when a financial institution operates in multiple jurisdictions and has customers with different types of accounts. But if organizations can break down silo barriers, they can reap the benefits: not only will the reporting process go more smoothly, but having more granularity and insight into their own data will have positive effects on firms’ operations and business practices in the long run. This will also enable the seamless SCV that financial institutions must tackle to be fully compliant.

A Powerful Remedy

To resolve the eligibility, aggregation, validation, and reporting headache, financial institutions will need a holistic, transparent remedy. A high level of data integrity enables financial institutions to satisfy regulatory requirements, strengthen resilience in times of difficulty, and ultimately, enhance decision-making and drive business growth. In a time of COVID-19 disruptions and rapid regulatory change, it is even more important than ever for financial institutions to have complete visibility into their data and be strategically prepared to manage change. The Deposit Guarantee Scheme Directive reporting capabilities running on AxiomSL’s ControllerView® data integrity and control platform enable financial institutions to collect and aggregate the data required for DGSD reporting for both the EU and for NCAs. As they assess how to move forward with a new normal, organizations can be confident that they are both meeting current requirements and implementing scalable, flexible and technology-driven processes to adapt to an ever-changing regulatory landscape in the future.

AxiomSL invites you to have a conversation about Deposit Guarantee Scheme Directive to keep the headaches in check, contact us.

The following topical pieces about risk and regulatory reporting in the age of COVID-19 may also be of interest:



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