RiskTech Forum

AxiomSL: AnaCredit - Regulation Gets Granular

Posted: 19 January 2017  |  Author: Abhishek Awasthi  |  Source: AxiomSL

The recent economic and financial crisis has revealed the inadequacy of ‘traditional’ statistics to support policy making – making the requirement of additional information at a more granular level necessary. In 2016, the governing council of the European Central Bank (ECB) approved a new statistical regulation establishing a common, granular big data database – AnaCredit. This comes as a result of the need to ‘move beyond the aggregates’ – the title of the latest ECB Statistics Conference in July.

The banks have raised concerns around these requirements as they are facing a number of challenges before the go-live date in 2018. Firstly around the quality, completeness and availability of data. More specifically, front office and back office systems, particularly the older ones, do not capture the data that is required for this granular reporting. This in turn will lead to system augmentations, meaning an increase in resources – staff, time etc. – to reach the level of complexity required for reporting.

In many instances, the data attributes have neither been required for external reporting, nor been stored electronically in banks’ systems. In this case, banks must demonstrate their ability to source and loan-by-loan basis. The quality of this information can vary, and is often scattered across a multitude of systems and needs to be grouped before submission – banks must apply high levels of controls to ensure data quality and consistency.

Another worry for banks is the potential overlap with adjacent regulations – these include outputs from CRD IV, BCBS 239, MiFID II and other accounting projects such as IFRS 9. AnaCredit, within the Single Supervisory Mechanism (SSM), will be the first European framework that will deliver a wider reporting coverage. The question is whether institutions can resolve this in a way that makes sense operationally – all the overlapping regulations in isolation will lead to higher costs in achieving appropriate and timely compliance.

Some vendors may be using AnaCredit as a means of pushing out new products, which appears to be the case in Germany. This could potentially result in untested technology, additional platforms and data consistency challenges. This is where AxiomSL’s ‘one platform’ model is able to limit the issues relating to not only AnaCredit, but a depth of regulatory reforms and any new ones. AxiomSL provides all the data aggregation, validation and reporting functionality needed to comply with the AnaCredit regulation. The model allows the same system to be used for all other reporting and stress testing requirements.

Capacity and centralisation as opposed to localisation has been another big point of discussion. Where larger firms have several subsidiaries and/or branches in Euro member states, they may be considering going through a multitude of transformational projects to replace tactical solutions with more holistic ones. Again, this is where AxiomSL’s single platform allows for simple and easy centralisation instead of time and cost ineffective local solutions.

Firms need to start focusing on their AnaCredit solution today if they have not done so already. A total solution will be necessary to extend to the full requirements of this regulation by 2018. All firms’ chosen platform should be able to accommodate not only Stage 1, but also Stages 2 & 3 once they are confirmed by the ECB – something that AxiomSL’s solution will achieve.