The challenging requirements of regulatory reporting for financial institutions

The new regulatory framework that followed the crisis of 2008 has huge implications for financial institutions. Complying with all the new rules is challenging for banks and insurance companies.

  • How can supervisors and regulators organize the requirements in a more efficient and effective way? 
  • How can banks and insurance companies deal with the constant evolution of these requirements?
  • What role should the compliance department play in product and business development?
  • Which IT solutions are available to reduce the reporting burden and improve the data quality?
  • How should banks and insurance companies adapt their internal organization? 

On the side of banks, the CRD IV Package within the Single Supervisory Mechanism sets minimum standards with respect to capital ratios, capital quality and liquidity management. In this context, banks within the Eurozone now need to report to the ECB and show that they comply with these standards. The European Banking Authority (EBA) has been mandated to set up uniform reporting requirements for all banks in the EU, under a regulation called ‘ITS on supervisory reporting’ (Implementing Technical Standards on supervisory reporting). These requirements present a considerable additional burden to the already demanding data and systems needed to be compliant with the International Financial Reporting Standards (IFRS), as emphasized by the European Banking Federation (EBF). 

Besides the regular reporting, banks are confronted with specific demands, such as stress testing, AQR reporting, or any other information which the supervisor considers necessary to fulfil its supervisory tasks. As this information needs to be delivered on sometimes short notice, they put an additional pressure on reporting departments and are challenging to achieve an acceptable data quality. Furthermore, not only the micro prudential supervisor is imposing reporting. Also the monetary authority, the macro prudential supervisor, the ESRB, public statistical services, tax authorities, market conduct supervisors, deposit guarantee schemes, resolution authorities, etc. can ask for additional information, which is often overlapping with other reporting, but which has to be delivered in a different format and timing.

In addition, with these requirements come other regulatory constraints that relate to reporting. As an illustration, BCBS 239 principles imposed strong constraints on the capacity of banks to aggregate risk data. On a rather short timeline (3 years between 2013 and 2016), banks had to adapt their governance systems, IT infrastructures, reporting tools and internal control mechanisms to make sure they comply with these principles. Data security and privacy are other issues that also arise with newly introduced reporting requirements.

Insurance companies are facing the same issues: disclosure requirements is one of the pillars of Solvency II, and the European Insurance and Occupational Authority (EIOPA) is working on a harmonized EU-wide reporting format to ensure a consistent implementation of European regulatory and supervisory frameworks. And as insurance companies are increasingly considered as potentially “systemically important” institutions, additional reporting requirements are to be expected.

One important source of difficulty for financial institutions is the fact that these reporting requirements are ever changing. In December 2013, the EBA published a final draft Technical Standards on metrics for monitoring additional liquidity. Since then, every year the EBA issues updates and revisions on these standards. And insurance companies face the same obstacle: the EIOPA plans the release of one reporting taxonomy per year. It is therefore essential for both banks and insurers to always make sure that they are up-to-date on the latest revisions of data reporting requirements.

These requirements take a significant part into the tsunami of new regulations that followed the crisis. As a result, compliance officers become the hottest areas of financial recruitment, as indicated by the Financial Times. Banks massively recruit compliance profiles. And the role of compliance staff members is increasing within banks. Financial institutions rethink the role of the compliance department within their organization also in charge of compliance with regulatory reporting.

These challenges were discussed during a regulatory workshop with contributions by professionals from the financial businesses, consultants and regulators.

  • Wilfried Wilms, Senior Policy Advisor of European Banking Federation (EBF)
  • Gino Coene, Industry Leader Risk Management at SAS
  • Ruben Olieslagers, Head of Capital and Business Management at BNP Paribas Fortis
  • Giancarlo Pellizarri, Head of Supervisory Statistics Division at ECB

he workshop was closed with a panel discussion moderated by Professor Freddy Van den Spiegel.

Read the full report of the workshop on ‘Regulatory reporting for financial institutions’.

Professor Van den Spiegel is Adjunct Professor at Vlerick Business School. Also, he is Economic Advisor at BNP Paribas Fortis and Professor at the University of Brussels. His interests include regulation and supervision, as well as the impact of globalization and European integration on financial markets and risks. For the Regulatory Workshops within the Vlerick Centre for Financial Services, Professor Van den Spiegel is moderating the debates and is coordinating the Vlerick Policy Paper Series.


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