Despite EU banks being required to report up to 700,000 data points quarterly for prudential reporting, they are still exposed to systemic risk.
For each regulatory change, firms go through the same process of seeking external interpretation, carrying out internal analysis, and then sourcing and processing data through their individual data models and systems – a highly intensive process requiring large investments of time and resource.
It is clear a new information value chain is needed for reporting which helps to increase efficiency of supervisory processes, minimise risk, allocate resources effectively and improve the basis for decision-making by higher transparency and faster availability of data.
Regnology has developed a solution to address these reporting issues; AuRep. In Austria, the central bank Oesterreichische Nationalbank (OeNB) together with the country’s banks and Regnology 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 1200 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. AuRep is processing over 1.4 billion records each reporting date. It allows reporting of current prudential and statistical requirements and also incorporates future regulations such as AnaCredit.
AuRep runs on Regnology GMP, a common software platform, which works as the central interface between the banks and the OeNB. In addition to outsourcing the reporting task through joint venture, Austria has also chosen an innovative approach regarding the data input format. The template-based reporting method replaces the “input-based approach” based on data cubes.
Built on the Abacus data preparation and calculation engine, AuRep is able to deal with growing regulatory demands in fully industrialized fashion including handling regulatory ad-hoc requests from the regulators.
Austria has seen a decrease in the cost of regulatory reporting across the entire country and dramatically reduced the systematic risk exposure.
Built on Regnology's Abacus data preparation and calculation engine, UKRep is one of the initiative from the FCA's "Unlocking Regulatory Reporting" Hackathon.
UKRep was designed as a central interface between the banks and the financial regulators, using Regnology's Abacus component at its core. The solution replaces the template-based reporting method with an “input-based approach” based on data cubes.
The Abacus engine transforms micro data related to single contracts or deals like loans, deposits and securities and transforms them into "basic cubes" enriched with additional attributed. The required reports are then generated as multi-dimensional data cubes referred to as "smart cubes". Those smart cubes are then analyzed, signed off and remitted to the regulator.
UKRep is able to deal with growing regulatory demands in a fully industrialized fashion and provides the opportunity to significantly reduce regulatory ad-hoc requests from the regulators through the re-use of existing data in the cubes.
To further enhance this solution, semantic technology was introduced allowing the team to create models of the regulation, the reports and the banks' data, and to then link these models together. The semantic models are designed to be executable, enabling the team to run queries and to use them to rapidly respond to regulatory change through the auto-generation of various artefacts.
AuRep and UKRep demonstrate how RegTech allows to reduce the burdens for the financial industry.
Additional cost savings can be achieved through the central service provider and the central regulatory maintenance.
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