-
Modern Risk and Finance
January 4, 2021
A G-SIB data governance journey for US regulatory reporting
By Ravishankar Narayanan, Consulting Practice Director, Oracle Financial Services, Sameer Singh, Consulting Technical Manager, Oracle Financial Services, & Prem Subramanian, Consulting Technical Manager, Oracle Financial Services
If there's one thing you can't avoid as a financial services organization operating in the US, it's US Federal Reserve Regulatory Reporting. The banking industry faces two key challenges: (i) tackling MRAs (Matters Requiring Attention) and MRIAs (Matters Requiring Immediate Attention) from the Fed and (ii) adherence to the Basel Committee on Banking Supervision's standard 239 (BCBS 239).
Considering the ongoing need across the US banking industry, Oracle Financial Services has created specific solutions for financial data warehousing, regulatory reporting, and data governance.This blog series will take you through a G-SIB (Global Systemically Important Bank), how we partnered with their leadership team, and leveraged Oracle's data governance platform capabilities.
Today's landscape: BCBS 239 compliance and G-SIBs implementation status
As per the recent list of G-SIBs released by Financial Stability Board in conjunction with BCBS on the compliance of the 14 BCBS 239 principles, around 90% of the G-SIBs are non-compliant on all 14 principles.
Source: https://www.bis.org/bcbs/publ/d501.pdf
The compliance of BCBS 239 has prompted banks to revisit their data governance journey. It has led them to take up further data management improvements with Oracle across their processes and operations. There is a pattern to extend beyond BCBS 239 to establish a comprehensive regulatory data dictionary for financial data warehouses and regulatory reporting.
Know the difference: financial data vs BCBS data
Financial data in banks are usually available within the finance and control team and used for filing the standard financial reports (quarterly, annually or event-specific). However, BCBS data requirements call for a cross-sectional view of non-accounting financial data (Risk-Weighted Assets, Fair Value, etc.) from Treasury, Risk, Finance and Performance functions. This involves multiple source systems and data transformations, compliance of multiple conditions for reporting, and makes audit and verification of data very challenging.
Significance of data governance
Two of the critical aspects of BCBS 239 principles are Risk Data Aggregation and Risk Reporting competencies. The intended outcome from these initiatives is a comprehensive governance program, robust enterprise-wide data framework, sound processes and controls to facilitate early identification of problems, opportunities to take appropriate actions, and accurate reporting to management and regulatory authorities.
Establishing a governance program is a great first step, but doesn't ensure the desired outcomes. A disciplined approach, clear policy definition, sound methodology, and the "right mix" of products and solutions are essential for implementing the BCBS 239 principles.
Oracle: not just any data governance
Oracle's Data Governance for US Regulatory Reporting solution addresses the key issues highlighted for compliance with BCBS 239 and broader reporting needs. The solution enables financial institutions to map multiple data sources to a standard, common business glossary and operationalize data governance with out-of-the-box validations of regulatory reports & automation processes.
Oracle's data governance solution enables clients to:
- Identify critical data elements
- Track and monitor data elements from source to reporting
- Manage the lifecycle of regulatory submissions
- Establish a sound data governance and reporting process for greater visibility and increased confidence with a board of directors and regulators
- Consolidate and collaborate across the enterprise for a truly unified enterprise data management process
This diagram provides a high-level workflow of the data governance solution:
What sets Oracle apart: key functionality
- Data lineage – View the end-to-end lineage from a system of record (SOR) to the reporting numbers for transparency, avoiding MRA and MRIA from regulators
- Restatement capability – Get insights into the variances of the post- and pre- restated periods with instrument drill-downs and dimensions
- Edit checks library – Access an exhaustive library of edit checks which include additional reviews beyond Fed Reserve recommendations, providing logical accuracy behind the numbers
- Controls – data and process for monitoring purposes
Oracle and the G-SIB data governance journey
A US-based G-SIB approached Oracle for their BCBS 239 compliance and governance of data, after receiving remarks by the regulators on the deficiencies of their data governance.
Following were the high-level use cases and the objectives pointed by the G-SIB:
|
Use Cases |
Objectives |
|
Regulatory Reporting Variance Analysis |
Period-over-period variance analysis reporting with SOR and LOB (Line of Business) filters and ability to drill down to the instrument-level |
|
Control Catalog |
Single pane of glass for data in motion, and at rest |
|
Data Reconciliation |
End-to-end balance reconciliation and failure alerting |
|
Dollar Tables/ Orphan Records |
Use the Orphan record table pattern capability within the Oracle analytical application infrastructure |
|
Direct Posting Facility |
The controlled and auditable mechanism that enables the posting of specific values to regulatory output schedules as needed |
Oracle and the G-SIB leadership jointly created an implementation road map with a clear intention to hold a pilot program, ensuring stakeholders achieve the minimum viable solution.
The G-SIB highlighted that Variance Analysis was their immediate use case for resolution. They were dependent on spreadsheets leading to issues, errors, and delay in timely decisions with respect to the reporting numbers period over period. Accordingly, the use cases were developed into high-level requirements, mentioned here:
|
Key Requirements |
Details |
|
Reporting Format |
A report depicted by schedules, line of business, system of records, microdata reference manual - cell identifier, legal entity |
|
Thresholds settings to mark favorable/adverse variances
|
The variance between any two reporting periods in absolute numbers and percentage Configuring indicators marking period over period variances that exceed a threshold |
|
Work Flow and Audit Trial |
Direct posting – ability to make adjustments to the cell identifiers comment capture capability in the workflow and audit trail |
|
Slice and Dice of Data |
Drill down to the lowest grain of data - instruments data Drill down by various data dimensions |
My colleagues Sameer Singh, Prem Subramanian & I co-authored this blog. We would love to hear your views. To learn more, feel free to Email us to explore more, or have a conversation.
Stay tuned for part 2 of this blog series to read more on how this story unfolds.
For more information, please visit:
Oracle Financial Services: oracle.com/financial-services
Subscribe to The Check-In, our financial services newsletter:
Keep up with the latest blogs and more: Sign up today
Contact us:
Request for Information: Link
Follow us:
LinkedIn: https://www.linkedin.com/showcase/oraclefs/
Facebook: https://www.facebook.com/OracleFS/
Twitter: https://www.twitter.com/oraclefs