04/09/2018 – By Abraham Teo, Head of Product Management APAC, AxiomSL APAC
Earlier this year in April, the Monetary Authority of Singapore (MAS) announced that the compliance deadline for the revised MAS 610 reports has been set for March 2020. That is a good 18 months away – more than enough time to get things done. Right? At first glance, this may very well be the case. But taking a deeper look into what it really takes for a Financial Institution (FI) to obtain the additional information required in these new forms, a very different picture is emerging entirely.
To put things in perspective, the revised MAS610 consists of over 60 returns and over 300,000 data points that need to be mapped. Mapping these data points to the report is already a mammoth task in itself. Now factor in the time and effort required to build a complete reporting ecosystem for data governance around the new reporting standard as well as an internal parallel-run schedule. It wouldn’t take long to conclude that 18 months is barely enough time to just “get things done” especially with the first of the implementation progress reports to MAS due in the next few weeks. Not convinced? Here are 3 compelling reasons why you should be kickstarting your implementation project for MAS 610 today.
All FIs are due to submit their half yearly progress report to MAS by the end of September 2018. Let’s assume your FI is considering bringing on a new reporting system onboard and starts the contracting process at the start of September – which at the very least can be submitted to MAS as an indication of progress. The contracting process is likely to take two months followed by a full month of project preparation activities such as workshops, high level design, project milestone definitions and work-order breakdown. December is the only month left in the year to kickstart initial implementation activities before the End of Year reporting in January 2019.
This leaves just 12 months for implementing 60+ returns spanning across various positions, transactions and statistical reporting.
Activities such as data sourcing, data cleansing & processing, building a data validation/critical data element gaps framework, manual adjustments framework, variance analysis framework and reporting numbers validation framework over and above feeding the data to the returns are critical activities that need to be accomplished within the 11 month timeframe after EOY reporting has concluded.
2) DATA GAP CLOSURE PLANNING
The data elements required in the revised MAS 610 reports are significantly more complex and granular. FIs need to submit over 300,000 data points which is a steep increase from the 4,000+ data points in the past. This is more than 8000% increase in data points as compared to what was previously required! Some data points required in the new reports are not even captured by FIs now such as the trade booking location, mode of trade transaction (booking through a system or over telephone) or asset grouping by country and loan purpose (whether the purpose is to buy an HDB or other properties) just to name a few.
While using a Taxonomy such as AxiomSL’s MAS 610 Open Taxonomy may help to alleviate some pressure on this front, FIs need to proactively look into enriching and enhancing data collection from trade capture to reporting in order to plug any data gaps.
Substantial changes to existing systems and processes may be required to capture the additional data points.
In cases where data collection is still done manually, automation of processes and system upgrades will be necessary. This means additional time and resources will need to be factored into the project plan.
3) RESOURCE AVAILABILITY AND INTERNAL PARALLEL RUNS
The changes proposed in the revised MAS 610 will affect all FIs in Singapore. This means that from Q2 of 2019 onwards, when the urgency sets in, there will be a substantial increase in the allocation of internal resources towards MAS 610 delivery projects.
It is very likely that there will be a sudden surge in demand for System Integrators and Consultants as the pressure of meeting the compliance deadline builds.
Australia is a prime example of this. Australian Prudential Regulatory Authority’s (APRA) Economic and Financial Statistics (EFS) reporting was set for a compliance deadline in the first quarter of 2019. 2018 saw affected Authorised Deposit Taking Institutions (ADIS) all scrambling for consulting and technical resources at the same time. A sudden and drastic increase in demand would change market dynamics as the supply pool remains finite. The best System Integrators and Consulting firm would also have been committed early on to existing projects. As the compliance deadline looms, it will only get more difficult and expensive to engage resources as the talent pool grows smaller. The earlier an FI starts its project, the lower the cost of implementation.
Internal Parallel Runs
To ensure a seamless transition into the regulator mandated parallel run period starting April 2020, FIs need to be ready not just from reporting perspective but also the internal process and controls perspective.
Ideally, FIs should be running test scenarios beforehand and engaging in at least 1 cycle of internal parallel run of 3 months in preparation of the actual exercise.
Based on the above timeline, FIs should be quasi-production ready by December 2019. This means a further reduction in the 18-month window due to the additional 3 month buffer being imposed for test runs. Over and above, the parallel runs would also necessitate a mechanism to reconcile the current MAS 610 numbers with the new MAS 610 numbers. This reconciliation step is another item that needs to be factored in as a project activity that will impact the already shortened timeline.
SO WHAT DOES THIS MEAN?
As depicted in the scenarios above, the original 24-month implementation timeline hardly seems long enough. In light of the half yearly progress reports to MAS due in the next few weeks in September 2018, coupled with the foreseeable competition for manpower within a finite pool of skilled resources in the upcoming months, FIs no longer have the luxury of time to take a wait and see approach. In order to efficiently and effectively comply with the upcoming MAS 610 reporting requirements, FIs need to lock in a project plan and start securing resources today.