The European System of Central Banks are working to develop an integrated reporting dictionary (BIRD) and reporting framework (IReF) that could transform the efficiency of banks’ regulatory reporting. Details are emerging and some banks have already begun working on BIRD with a view to achieving smooth and successful implementation.
The European System of Central Banks (ESCB - which consists of the European Central Bank and the national central banks) has a long-term goal of improving the consistency of data collection from banks. Its aim is to reduce the reporting burden on banks, improve the efficiency of reporting and enhance data quality. The ESCB is therefore developing two key SSM-wide initiatives:
- BIRD (the Banks' Integrated Reporting Dictionary) which is a data model (not a database) aims to create common definitions for prudential reporting; describe the data to be extracted from banks' internal systems; set out the transformation rules to be applied for banks to organise their internal data appropriately; and standardise banks' reporting processes to National and European authorities.
- IReF (Integrated Reporting Framework (PDF 224 KB)). This aims to set out an integrated reporting scheme for banks that could be applied across the Euro area. That would simplify reporting processes by ensuring data collection only once via an integrated scheme that European authorities could then use to generate specific analysis and reports, and reducing ad-hoc data requests.
Figure 1: The ESCB’s approach to banks’ data reporting
For now, BIRD could be internally deployed on a voluntary basis and some banks are already interested in the benefits it could provide. For example, BIRD would provide banks with a common regulatory reporting glossary (deployable internally within different departments/functions). This will allow banks to define and map data once for all reporting needs, as well as develop tools and solutions that could reduce the costs of the production of regulatory reporting.
It's worth noting that key elements of BIRD are publicly available via the ECB website. These include the BIRD database and technical Guidelines which provide detailed information on the transformation schemes that banks could use to map and manage their data. Currently AnaCredit, Securities Holdings Statistics (SHS), COREP and FINREP are incorporated into BIRD's 2019-2020 workplan.
To ensure that BIRD will work 'in the real world' the ESCB is working closely with banks, consultancy firms and software companies via data modelling and data testing work streams. For banks, sharing knowledge with their peers and building external alliances will clearly be essential to successfully implementing BIRD.
Meanwhile the ESCB continues to work on IReF and has used a qualitative questionnaire (PDF 13 MB) to collect banking industry views on the concept. The results showed that reporting agents strongly support setting up a reporting system that would enable supervisory data to be collected via a broader integrated framework. They also believe that IReF will unlock the potential of BIRD for fulfilling reporting requirements, and support integrating Anacredit into IReF in such a way that granular loan data could be directly used to compile aggregated statistics. Implementing IReF will not be without its challenges, but many banks believe it should improve data quality, allow more time to verify data consistency and reduce their reporting burden.
The ESCB will cooperate with the banking industry to define the shape of IReF by 2024. Allowing for a smooth transition based on industry feedback, the ESCB believes IReF could be implemented between 2024 and 2027.
In addition to work being done by the ESCB, the EBA has also been mandated by the European Commission (via the Capital Requirement Regulation 2 (PDF 1 MB)) to prepare a feasibility report into the development of a consistent and integrated system for collecting statistical data, resolution data and prudential data. It is due to report its findings to the European Commission by 28 June 2020. The EBA should take the ESCB's previous work on IReF into account, based on an overall cost/benefit analysis. This feasibility report is part of the EBA's 2020 work programme (PDF 434 KB) and aims to increase standardisation, ensure common definitions, reduce redundancies and ease the burden for institutions. Within one year of the presentation of this report, the European Commission could submit a legislative proposal to the European Parliament and European Council for setting up a standardised and integrated reporting system.
In time, the setting up of both an integrated reporting dictionary and integrated reporting framework should reduce banks' compliance burdens and achieve lasting improvements in efficiency. Consistent definitions and processes will simplify the current situation, which sees many banks using the same underlying data to fulfil a wide variety of overlapping supervisory and regulatory requests. Eliminating duplication and the need to reconcile different datasets will be increasingly valuable as supervisors and regulators increase their demands for granular and deep dive data analysis.
For now, KPMG professionals are actively involved in shaping BIRD through our involvement in the ESCB’s project team, helping the ESCB to define test cases that will help ensure BIRD and its associated requirements work well. Some banks are already investing in BIRD and ensuring that they define and map their reporting data as this is key to optimising the return on investment.