Addressing the complexities of the regulatory environment
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.
BearingPoint 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 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 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 BearingPoint ABACUS/GMP, 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/GMP. 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.
As an outcome, Austria has seen a decrease in the cost of regulatory reporting across the entire country. It has also dramatically reduced the systematic risk exposed to banks by these changes in regulation.
Using BearingPoint’s Abacus360 platform as its basis, UKRep was created as a concept as part of one of the FCA’s ‘Unlocking Regulatory Reporting’ Hackathon. UKRep was designed to show the art of the possible and how you are able to industrialise the entire regulatory reporting process by providing a single industry utility.
As a concept, UKRep has been designed as a central interface between the banks and the financial regulators, using BearingPoint’s common software platform – Abacus360 – at its core. The solution replaces the template-based reporting method with an “input-based approach” based on data cubes. 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 Abacus360. These basic cubes are enriched by additional attributes and then the required reports are generated in the form of multi-dimensional data cubes, the so-called “smart cubes”. Smart Cubes are finally analysed, signed off and remitted to the regulator. Based on the Abacus platform UKRep is able to deal with growing regulatory demands in a fully industrialised 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 which allowed the team to create models of the Regulation, the Reports and the Banks data, and to then link these models together. The semantic models were also created to enable them to be executable, thus enabling the team to run queries across them and to use these models to rapidly respond to regulatory change through the auto generation of various artefacts.
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 and UKRep are a good example of a RegTech where use of technology allows for reducing the burdens for the financial industry. This was recognised at a recent FCA TechSprint event, where a cross-industry panel of judges awarded BearingPoint’s UKRep first place for a solution which has the biggest potential to move the UK regulatory market forward.