23 September 2017
Abhishek Awasthi

Regulation and risk

Abhishek Awasthi - AxiomSL

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AnaCredit has taken data to a new level of scrutiny

05 April 2017  |  3835 views  |  0

The years following the financial crisis have seen a considerable increase in the amount of data that regulators demand from market participants, as they attempt to better understand developments in the market and identify risks. In order to respond to this challenge, the governing council of the European Central Bank (ECB) approved a new statistical regulation establishing a common data database – the Analytical Credit Dataset, also called AnaCredit, in 2016.

With the help of AnaCredit, the ECB aims to create a central register of granular data about the credit exposures of credit institutions and other loan-providing financial firms in eurozone countries, as well as a handful of non-eurozone countries, including Denmark and Sweden.

Many banks have raised concerns around AnaCredit as they are facing a number of challenges before the go-live date in September 2018. For example, credit institutions will need to report more than 100 data attributes detailing their credit exposures, many of which have never previously been required for external reporting. As a result, banks will need effective data quality functionality to ensure their data is both accurate and consistent.

In addition, the ECB has set the reporting threshold for reportable loans to amounts equal to, or larger, than EUR 25 000 and will require more frequent reporting than is currently mandated by domestic credit registers. This means that banks will need to produce significantly more regulatory reports at more frequent intervals. Although the initial reporting will only be for loans to corporations and other legal entities, the project might be extended to include housing loans to private households in the future, which will considerably increase the reporting burden.

Banks have also raised concerns about 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 level of 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 the new reporting rules.

Another worry for banks is the potential overlap with related regulations – these include CRD IV, BCBS 239, MiFID II and other accounting projects such as IFRS 9. AnaCredit will be the first European framework to deliver 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.

As banks assess the technology necessary for their AnaCredit reporting requirements, there are a number of points they should bear in mind. Firstly, given the similarities between the data needed for AnaCredit and other requirements, firms should look to combine all their necessary reporting on one single platform. This will enable them to avoid duplicate work, such as loading and processing the same data multiple times. It will also help to ensure consistency between the data in the different reports.

As much of the data that firms require for AnaCredit reporting is likely to be maintained in different systems, they will need robust data aggregation and data normalisation functionality to bring all of the data together and complete their reports. Firms should also consider whether the reporting system they intend to use will scale to accommodate the large number of reports that will need to be produced for compliance with AnaCredit reporting rules.

Given the onerous nature of the new reporting requirements for AnaCredit, if they have not already done so, banks need to start considering what solution they will use to fulfil the new requirements. If they do not start making preparations soon, it will be too late and the consequences could be grave.

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AnaCredit has taken data to a new level of scrutiny

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job title Product Manager
location London
member since 2017
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Abhishek Awasthi is Product Manager for AxiomSL's FinStat and AnaCredit Products

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