01 Feb Will your reporting tool support the revised Pillar 3 disclosures (BCBS 309)?
Feb 1, 2016 – By David Attenborough, Business Development Manager, EMEA
Banks have traditionally done their Pillar 3 disclosures manually. However, most will now need to automate the process as a result of the Basel Committee on Banking Supervision’s revised Pillar 3 disclosures (BCBS 309), which will significantly increase the frequency of the disclosures and the volume of data to be reported. For those affected, this raises questions about the flexibility of their regulatory compliance infrastructure.
Ideally, most banks would like to use their incumbent regulatory reporting tool to execute the revised Pillar 3 disclosures (BCBS 309). However, they will find this extremely difficult if their reporting tool requires the use of a fixed data model. If this is the case, the data model will need to be carefully remodeled to include all of the newly-required data attributes. This will be a slow, painstaking process and all users of the tool will be obliged to adopt the updated data model whether or not they are subject to the new reporting requirements.
The situation is complicated by the fact that the revised Pillar 3 disclosures (BCBS 309) will be amended when they are transposed into law in individual jurisdictions. This means a reporting tool’s mandatory data model will need to be revised multiple times, impacting all users in all jurisdictions on each occasion.
For these reasons, it is clear the best way to implement the revised Pillar 3 disclosures (BCBS 309) is by using a highly flexible reporting solution, which does not impose the use of a particular data model. This is how AxiomSL’s regulatory calculation and reporting platform works. It means banks can load their data onto the platform in any format and do not need to worry about mapping to a particular data model.
Using a reporting tool that does not mandate the use of a specific data model minimizes the impact caused by changes to reporting requirements. It means users do not need to spend time testing all aspects of a revised data model every time regulators make a change to their reporting requirements.
Although the AxiomSL platform does not have a fixed data model, we do support what we refer to as loosely integrated taxonomies. This means we provide separate taxonomies for individual regulatory reporting requirements and highlight the data definitions that are common between different reporting requirements. We then give users the option to implement a single business rule for common attributes. It is up to the users to decide whether they leverage the commonality between different taxonomies immediately, at a later stage or never at all.
The loosely integrated taxonomy approach will be particularly beneficial when implementing the revised Pillar 3 disclosure (BCBS 309) requirements as there is likely to be a significant overlap with the data that is required for other regulations. Banks will be able to take advantage of this overlap and achieve efficiency by implementing common business rules for attributes which are required for both the revised Pillar 3 disclosures (BCBS 309) and, for example, Financial Reporting (FINREP), Common Reporting (COREP) and regulatory capital requirements.
The loosely integrated taxonomy will also make it easier for banks to manage different interpretations of the revised Pillar 3 disclosures (BCBS 309) in individual jurisdictions. This is due to the fact that taxonomy changes are localized and will not affect users in jurisdictions where there has been no change to the reporting requirements. For example, when the revised Pillar 3 disclosures (BCBS 309) are transposed into US law, there will be no impact on those who are using the reporting tool to do their disclosures in the European Union (EU).
The BCBS revisions represent a significant change to the Pillar 3 disclosures. However, banks that use a flexible reporting solution, which does not impose the use of a particular data model, will be able to absorb the change comfortably.