Reducing reporting burden for European banks while increasing data quality: a challenge for the EBA

Under article 430c of the updated Capital Requirements Regulation (CRR 2), the European Parliament and the Council of the European Union mandate that the European Banking Authority (EBA) perform a feasibility study on reducing the reporting burden for the European banking sector while ensuring data collection for monetary policy, resolution and supervisory purposes and take into account input from the European System of Central Banks (ESCB).

In October 2020, the European Central Bank (ECB) published the ESCB’s input for the EBA’s feasibility report. The ESCB proposed the set-up of a joint committee consisting of representatives of the banking industry as well as relevant national and international authorities including the ECB, the EBA, the Single Resolution Board (SRB), the European Commission, the Financial Stability Board (FSB) and the Basel Committee of Banking Supervision (BCBS).

Enhancing cooperation among European authorities

The joint committee would not have legislative powers but act in an advisory capacity, facilitating interaction and coordination between the different parties involved. It would be divided into two sub-committees to avoid a conflict of interest. One sub-committee – comprised only of the European and national authorities – would be tasked with issuing advice on reporting requirements. Another sub-committee would consist of both the authorities and the banking industry representatives, and advise on the most efficient implementation of reporting requirements.

The primary focus for the joint committee would be the creation of an integrated European data reporting model, a central data collection point, and a standard data dictionary for statistical, resolution and prudential purposes.

The proposed data dictionary has the potential to achieve two goals:

• Reporting integration (or information requirements’ integration),
• Semantic integration (i.e. common concepts and definitions across different domains).

Centralising data collection

Implementing a central data collection point aims to address a current issue with banks being required to fill in multiple templates for different authorities. In these templates, data points partly overlap, and the reporting frequencies and scope of consolidation differ. As a consequence, banks must run processes numerous times with different dimensions or values, resulting in high costs.

From the authorities’ perspective, the challenge resides in data reconciliation. For instance, resolution and prudential data currently follow different data flows, different data quality assessments, separate processes through national authorities to the ECB and the SRB and then to the EBA. A central data collection point would support implementing an integrated and consistent reporting model across all Member States.

Determining the right data granularity

The central data collection point will be able to receive both granular data (e.g. for compiling statistics) and aggregated data (e.g. for monitoring regulatory capital and liquidity ratios for prudential purposes). To achieve the objective of centralised data collection, the data reported in the future are expected to be more granular than is currently the case. The ESCB anticipates that the banking sector would be open to providing more granular data if their computation, aggregation and reporting process workload is significantly reduced.

The degree of granularity of the required data – particularly challenging for resolution and prudential data – will be further discussed. In particular, the variety and complexity of the prudential concepts to be considered, as well as the need for specific aggregates, are the reasons behind this difficulty. The latter cannot be derived by computing granular data, so authorities must rely on banks’ explicit modelling and assumptions. The joint committee will need to design an integrated statistical, resolution and prudential data collection model that addresses all authorities’ needs.

What’s next?

In the 2021 Work Programme, the EBA announced that its feasibility report was expected to be published in the third quarter of 2021.