This blog is an introduction to the Regulatory
Reporting. Regulatory reporting is mandatory activity banks have to perform
with the coordination of Treasury, Group Finance, IT, and business lines.
Regulators across the globe depend on accurate and timely submission of various
Risk and non-risk reports by banks to measure the overall health of the banking
sector.
Regulatory reporting in the banking sector is
reporting its business numbers to local regulators like RBI for India, FED for
the US. This includes the Balance Sheet, Profit & Loss statement, also
Capital adequacy, Liquidity Coverage numbers.
Banks generate and collect data from various
business lines. Collecting information from disparate sources is not only
cumbersome but also, at times, inefficient; the difference in reporting formats
governed by multiple regulators adds to the troubles. Data inaccuracy, the
dearth of skilled resources, need for constant reconciliation to recheck the
accuracy of the content are some of the other challenges. Regulatory reporting
needs to address the problem of legacy mainframes, lack of granular data,
intricate data mapping.
The regulatory reporting end to end process is not a
straight forward task. It has its own complex dynamics. The process followed by
various banks does differ to some extent but the crust of reporting remains the
same. Let us discuss the abstract view of current regulatory reporting all the
way from data sourcing to submission to external or internal supervisors.
The subprime crisis of 2007, when Lehman's Brothers
failed, Regulators thought of more stringent rules to apply for financial
institutions. The Basel committee came up with the recommendations of Basel
rules which as of now implemented as Basel III. There are strict guidelines for
Capital requirements and Liquidity Profiles to be reported with a certain
frequency and non-compliance to it has its own repercussions.
It's been quite an improvement with what Globally
Important and Systemic Banks are reporting but Regulators across the globe are
expecting more than just sending business numbers before deadlines. They want
automation and improved process with minimal adjustments by human
interventions. They want Banks to devote their 80% time on analysis of data and
20% time on production. Regulators are satisfied with the numbers that Banks
are reporting but they also want to see how those numbers are derived.
Let us see what existing abstract structure does
Banks have:
|
Fig 1:Regulatory Reporting Data Flow |
The above flow diagram shows how data flows from
upstream to downstream reporting. Disparate data coming from trade desks,
consumer transactions, loan contracts, etc. are extracted using batch processes
on a daily basis and it needs to be transformed so as to make data meaningful
and sometimes need to fill the blank spaces kept by traders :).Overnight data
gets batch processed and it further dumped in a data warehouse that works as a
single point of source for downstream reporting. This data can be further spitted
in different Subject Areas called Data marts.
Finally, this data gets picked up by BI tools which
can be used for Trend Analysis, Day on Day Delta exposure against different
dimensions. The same data can be used for regulatory filings by populating
numbers in the template as per Business Rules using AxiomSL® ControllerView®,
OneSumX®, or any in house strategic tool Bank has created.
Today Global Banks have to be flexible with
ever-changing regulatory requirements. The regulators are looking for more than
just reporting templates but automating and streamlining the entire process
till the last mile of reporting. There is still a larger gap when it comes to
BCBS 239 recommendations implementation regarding data lineage and manual
intervention and reporting in silos where reconciliation becomes a tedious
job.
There is a long way to go for financial
institutions in the Regulatory Reporting area from data sourcing till Report
generation. The Regulators have come up with solutions in the recent past of
creating reusable business concepts that can have certain dimensions and
measures. It can be used in different permutation and combination to create
view required for analysis and reporting which is called hypercubes. This
structure is quite flexible when it comes to any regulatory change which can be
seen in template-based reports where we need revamp each time there is a
regulatory change required. Please refer Stages
of Regulatory Reporting blog to know more about the various stages of
regulatory reporting.
About
Amlgo Labs : Amlgo Labs is
an advanced data analytics and decision sciences company based out in Gurgaon
and Bangalore, India. We help our clients in different areas of
data solutions includes design/development of end to end
solutions (Cloud, Big Data, UI/UX, Data Engineering, Advanced Analytics
and Data Sciences) with a focus on improving businesses and providing
insights to make intelligent data-driven decisions across verticals. We have
another vertical of business that we call - Financial Regulatory Reporting for
(MAS, APRA, HKMA, EBA, FED, RBI etc) all
major regulators in the world and our team is specialized in commonly used
regulatory tools across the globe (AxiomSL Controller
View, OneSumX Development, Moody’s
Risk, IBM Open Pages etc).We build innovative concepts and then
solutions to give an extra edge to the business outcomes and help to visualize
and execute effective decision strategies.
Please
feel free to comment or share your views and thoughts. You can always reach out
to us by sending an email at info@amlgolabs.com or filling a contact form at the end of the
page.
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