Ever since its inception in 1974, the Basel Committee on Banking Supervision has been responsible for the setting of global regulatory capital standards for banks. In that context, the publication of a consultation document on the implications of financial technology (fintech) developments for banks and bank supervisors in August 2017 was something of a departure for the committee.
Recognising the growing interest and investment in fintech, the committee’s fintech task force set out to consider various case studies, including big data, distributed ledger and cloud technology, and to make some key observations and recommendations. It may not be the most game-changing of publications, but the paper represents an authoritative regulatory position on what is acknowledged to be an increasingly important component of today’s financial system.
Naturally, the task force relied on trusted industry input as it researched and drafted the paper – but, given the vast number of fintech providers now in operation, it had to choose carefully. One valuable source of intelligence, whose reporting platform was cited in the paper as an example of a regtech (regulatory technology) offering, was Amsterdam-based technology and consulting provider BearingPoint.
It serves multiple sectors, but BearingPoint has built a particularly strong reputation among central banks and supervisors as a company that understands the data challenges inherent in today’s market, and can use technology to chart a means of tackling them. Its Abacus360 Regulator platform is installed at central banks across the globe, including at the National Bank of Romania, where it manages the collection, analysis and dissemination of supervisory and statistical data.
Alongside that commercial work, BearingPoint has come to be recognised as an authoritative source of advisory services on data management, and the Basel Committee is one of a number of international bodies to have tapped its expertise in recent years. BearingPoint has also contributed to the work of the Bank for International Settlements’ Irving Fisher Committee on Central Bank Statistics, presenting a paper at its March 2017 conference on big data in Bali.
“Our advisory services are often not based on commercial relationships, but may involve us attending central bank forums or off-site board meetings to share our experience and assess how particular institutions or regions could benefit from the deployment of regtech and supervisory technology,” says Maciej Piechocki, BearingPoint’s partner and lead for international regtech and supervisory technology activities.
“Central banks have become very data-driven enterprises since the crisis, but they often lack expertise, solutions and skills in dealing with data. Technology is required to manage data effectively, and we have come to be acknowledged as a company that understands central bank functions, data and technology.”
Consolidating a reputation
While individual central bank installations of BearingPoint’s Abacus software have helped to cement the firm’s reputation in this sector, it was its work in developing a shared data utility in Austria in 2013 that really put it on the map and led to consultation with the likes of the International Monetary Fund and the World Bank, as well as the Basel Committee.
The Austrian National Bank (OeNB), together with Austria’s commercial banks, have implemented a new reporting model in the country that uses the Abacus platform as a central interface between most of the Austrian banks and the OeNB. The utility, known as Austrian Reporting Services (AuRep), uses data cubes to simplify and streamline the reporting process. Instrument-level data is delivered to Abacus in a basic cube and then enriched before it is remitted in different reporting formats to the OeNB. AuRep began testing in 2014, and went into full production in 2015.
“AuRep is based on the transition from template-based reporting to input-based reporting – which means central banks receive data at the instrument level, rather than broader documents that they must decipher themselves. Based on the OeNB’s standard input data model and the associated need for more granular and frequent reporting, AuRep is a tangible example of how regtech can be used to solve industry challenges on a large scale,” says Piechocki.
“The new Austrian reporting system, as well as the co-operation model between commercial banks, software and service providers and the OeNB, represents a paradigm shift in reporting, which certainly [creates] some initial costs. However, these initial efforts pay off for all parties involved, because input-based reporting leads – among other things – to consistency, fewer revisions and inquiries from central banks, and fewer differences in interpretation of requirements,” adds Johannes Turner, director in the statistics department at the OeNB.
The new Austrian reporting system, as well as the co-operation model between commercial banks, software and service providers and the OeNB, represents a paradigm shift in reporting … Input-based reporting leads – among other things – to consistency, fewer revisions and inquiries from central banks, and fewer differences in interpretation of requirements
Johannes Turner, OeNB
Since the AuRep framework was successfully introduced in Austria, BearingPoint has explored the feasibility of applying similar solutions in other jurisdictions. In November 2016, the UK’s Financial Conduct Authority hosted a ‘TechSprint’ on regulatory reporting, and invited BearingPoint to participate. Teaming up with Model Drivers, a small technology consultancy, BearingPoint won an award for a proposed ‘UKRep’ utility, which would be based on similar principles to AuRep.
Huge efficiency gains
“We have now evaluated this kind of framework in more than 20 countries, all having different economies, banking systems and regulators, so the speed at which it matures will inevitably vary. UKRep offers huge efficiency gains to the UK market, and would share the huge cost of reporting across the industry. We have presented it to the stakeholders and shown them the Austrian model, so we hope it will progress,” says Piechocki.
BearingPoint has also been closely involved in preparations for AnaCredit, the European Central Bank credit register that will require all eurozone loans of more than €25,000 ($30,160) to be reported from September 2018. While AnaCredit has been on the horizon since 2011, central banks now need to get their systems in order to allow them to begin collecting and reporting the necessary data more frequently.
“AnaCredit will comprise a huge volume of data, representing the majority of outstanding credit in the eurozone, so it is a major project for Europe’s central banks. They will need to collect granular loan data from institutions in their jurisdiction, and then report them to the European Central Bank. We are helping a number of central banks with our Abacus360 Regulator solution, but also as expert advisers, to meet this important requirement,” says Piechocki.
The Central Banking Awards were written by Christopher Jeffery, Daniel Hinge, Dan Hardie, Rachael King, Victor Mendez-Barreira, Iris Yeung, Joel Clark and Tristan Carlyle