October 31, 2014 – By: Bahar Sezer, Research Analyst, Policy and Product Strategy EMEA
As new reporting requirements mount up and growing numbers of resources are needed to create, submit and analyze regulatory filings, it is worth considering how the whole process can be made more efficient. This is what the Banco de Espana (BDE) has done. The changes it has begun to implement as a result mark a significant departure from the status quo and could have an influence on the direction taken by other central banks.
Earlier this month, Fernando Restoy, Deputy Governor of the BDE, made a speech at a European Central Bank (ECB) conference, in which he pointed out that the data needed for monetary policy and banking supervision is often the same, but the reporting models used are “largely disconnected”. This has led to a situation where market participants must use one set of rules, templates and schedules to report data to monetary policymakers, and another set of rules, templates and schedules to submit the same data to banking supervisors.
Restoy argued that if such inefficiency is to be avoided, the industry must adopt a more “integrated approach” to regulatory reporting. A certain amount of integration has already been achieved in Europe through the implementation of Common Reporting (COREP) and Financial Reporting (FINREP), but the BDE believes integration should now go further by encompassing input data.
Restoy said central banks should consider creating a single data point model and dictionary with all of the elements necessary for identifying the data to be collected, including validation rules. He suggested that each central bank should also establish a single warehouse for all of the data it receives, which it can then retrieve as necessary.
The BDE has begun taking steps towards this more integrated reporting model. Having implemented FINREP at the consolidated level, it is now in the process of adapting its solo basis requirements, data point model and dictionary to the requirements of FINREP.
These changes will create a significant amount of work for market participants in Spain over the next couple of years. However, once they have implemented the necessary changes, they will see great benefits as they will only have to use one data point model for all of their reports to the BDE. Greater integration will help the BDE too, as all of the data it receives will conform to a single data point model and will be easy to compare without transformation.
The BDE is also creating a new Central Credit Register that will maintain micro-data that banks report on their financial assets and off-balance sheet exposures. This Central Credit Register will enable the BDE to improve the quality of its supervision because it will have the ability to compare the micro data and aggregated data reported by market participants.
These are exciting developments in Spain. They represent an important acknowledgement by a central bank that moving towards a more integrated approach to reporting will benefit both market participants and regulators.
As one of my colleagues will explain in this space in the coming weeks, Austria’s Oesterreichische Nationalbank (OeNB) is implementing similar changes with its Smart Cube reporting project – although it is not aligned to the European Banking Authority’s (EBA) taxonomy for COREP and FINREP. I look forward to seeing how other central banks respond over the coming months and years.[spacer]