The Austrian approach: Largest European reporting utility and innovative approach for data input
Regulation is vital for the stability of the global financial markets. But despite the fact that EU banks are required to report up to 700,000 data points quarterly for prudential reporting, it still leaves systemic risk exposed.
According to a current BearingPoint Institute paper, a new information value chain is needed for reporting which helps to increase efficiency of supervisory processes, minimize risk, allocate resources effectively and improve the basis for decision-making by higher transparency and faster availability of data.
This puts a spotlight to the Italian and Austrian input-based data models. Especially Austria’s innovative solution it is really getting supervisory authority officials enthused.
In Austria, the central bank Oesterreichische Nationalbank (OeNB) together with the country’s banks and BearingPoint as solution provider have implemented a new reporting model including an innovative outsourcing approach which could point the way to the future of regulatory reporting and has attracted great interest from other countries.
The largest Austrian bank groups representing around 90% of the market and 800 banks have founded a joint venture, Austrian Reporting Services (AuRep), which is regarded as Europe’s largest regulatory reporting utility or in other words large regulatory reporting hub. It allows reporting of current prudential and statistical requirements and also incorporates future regulations such as AnaCredit.
AuRep runs on BearingPoint ABACUS, a common software platform, which works as the central interface between the banks and the OeNB. But not only the outsourcing of reporting task to a joint venture is innovative. Austria has also chosen an innovative approach regarding the data input format. The template-based reporting method is going to be replaced by a so-called “input-based approach” based on data cubes. The Austrian banks deliver micro data on the level of single contracts or deals like loans, deposits and securities in the form of so-called “basic cubes” to ABACUS. These basic cubes are enriched by additional attributes and then the required reports are generated in form of multi-dimensional data cubes, the so-called “smart cubes”. Smart Cubes are finally analyzed, signed off and remitted to the OENB. Based on the ABACUS platform AuRep is able to deal with growing regulatory demands in fully industrialized fashion including handling regulatory ad-hoc requests from the regulators.
The strategic advantage of this approach:
The „basic cubes“ facilitate re-usability and analysis of the data for different purposes. Moreover, the costs for adaptation to new requirements can be kept at low level. Additional cost savings can be achieved through the central service provider and the central regulatory maintenance. At the same time, banks keep control of their sensitive data.
AuRep using ABACUS and providing a state-of-the art utility for regulatory reporting for banks is a good example of a RegTech where use of technology allows for reducing the burdens for financial industry.
The European Central Bank (ECB) is aware of the limits of the template-based reporting and sees the benefits of the “input-based approach”. With the European Reporting Framework (ERF), the ECB has launched an initiative to evaluate the “input-based approach”. The Expert Group on Statistical and Banking Data Dictionary was established to develop a Banking Data Dictionary (BDD), which defines a harmonized model for input data as well as rules for the transformation of input data to reporting data.
The BDD should be seen as a blueprint for the banks. It forms the conceptual basis of an “input-based approach", i.e., a data model for the organization of the regulatory reporting process within the banks. The approach is similar to the Austrian “basic cubes”. Another element of the ERF is a Statistical Data Dictionary (SDD), which aims to describe all data that is managed in the European System of Central Banks (ESCB).