The growth of banking regulation since 2008 has driven a surge in data volumes, handing a major challenge to the banks that must supply the data, and the central banks and regulators that must gather, process and analyse it. Many central banks are looking for advice and technological options to deal with this growing workload, and the winner of this year's consultancy award provides both the software and the accompanying support necessary to help central banks manage this adaptation.
Netherlands-headquartered BearingPoint has made a name for itself in this arena with its Abacus software, used in both the private and public sectors. The variant for regulators underwent an upgrade in 2016, and is now known as Abacus360 Regulator. Various central banks across Europe are using it for regulatory data gathering and remittance, with Romania and Germany being early adopters. Some are now drawing on BearingPoint's consulting expertise in preparing for the European Central Bank's (ECB) AnaCredit database on eurozone lending.
Abacus is designed to work more or less immediately "off the shelf", says Maciej Piechocki, the partner at BearingPoint leading the firm's work with central banks. Although a diverse range of central banks has expressed an interest in the product over the past year, they all face similar problems and have "exactly the same requirements" in terms of data collection, statistical and supervisory analytics and data dissemination, he says.
Where BearingPoint has implemented the product, in a handful of major central banks across Europe, the team has shown it is possible to get "a very robust" system in place in a matter of weeks, rather than years. Over 5,000 financial institutions across Europe now report through BearingPoint software, and data from over 2,500 firms is collected, analysed and disseminated via Abacus.
One major European central bank worked with BearingPoint in 2016 to install systems for a national regulatory reporting framework. The project manager at the central bank says BearingPoint's team was "very professional".
"They sent very good consultants from the beginning who really knew what our experts were talking about. The atmosphere was very good," he adds.
"The goal was always clear, and the way to reach the goal was very straightforward, so we did not lose much time in finding a common understanding."
They sent very good consultants from the beginning who really knew what our experts were talking about … The goal was always clear, and the way to reach the goal was very straightforward, so we did not lose much time in finding a common understanding
Project manager, major European central bank
The biggest challenge during the project was to build and test the taxonomy, using extensible business reporting language (XBRL), which is designed for business reporting. The team only had three months to get everything ready, and needed to prepare more than 2,000 validation rules in the process.
This threw up three problems, the project manager says. First, coping with the "pure mass of rules" was difficult. Second, some of the rules were very complex, so BearingPoint had to use "all of the tricks that XBRL allows" to make them work. And, finally, testing the product required a "clever test concept".
Ultimately, despite these large obstacles and the smaller problems that any project of this scale throws up, the testing worked out fine. "With a lot of overtime and weekend work, BearingPoint managed to keep the deadline," says the project manager. "We would definitely be willing to work with them again – their work was highly professional."
Preparing for AnaCredit
Abacus360 covers the whole "regulatory value chain", as BearingPoint calls it, from micro-data on individual bank loans right up to the highly aggregated data that is submitted to organisations such as the International Monetary Fund and Bank for International Settlements.
A key challenge for eurozone central banks has been putting in place the infrastructure needed to manage the ECB's AnaCredit project, which demands highly granular data on loans throughout the eurozone. BearingPoint's consultants are now working with many eurozone central banks on various aspects of implementing AnaCredit.
Requirements are very different in different countries. Although it is an ECB initiative, national central banks are being left to figure out how to implement the necessary systems themselves, and they are all starting from different places.
Piechocki says BearingPoint's work has ranged from consulting on the complexities of the new regulations to putting in place Abacus as a means of gathering data and remitting it to the ECB. Some countries have credit registers in place, while others need to build them from scratch. BearingPoint has also advised on the creation of 'data lakes' – vast repositories of raw data – and on the systems needed to handle the kinds of data volumes AnaCredit implies.
The upgrade to Abacus360 in the last year has added "much more advanced analytics", says Piechocki, but also a number of self-service components allowing regulators greater flexibility. The system allows reporting in XBRL, SDMX, ISO 20022, XML or Excel formats, and a new workflow manager helps central banks stay on top of their most complex processes. The system allows supervisors to conduct ad hoc data collections or stress-testing exercises in a "very efficient manner". As well as the platform itself, BearingPoint continuously updates the system based on the regulations underlying it, so data collection matches changes to Basel III, Solvency II, Mifid II and others.
The BearingPoint team has grown as more central banks express an interest, and Piechocki says the firm has heard from many central banks in Asia, Africa and Latin America in the past year, so more central banks look set to draw on the firm's expertise in the years ahead.