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A G-SIB data governance journey Part 2: Exploring granularity and facilitating insights for US regulatory reporting

Prem Subramanian
Consulting Technical Manager

By Prem Subramanian, Consulting Technical Manager, Oracle Financial Services, Ravishankar Narayanan, Consulting Practice Director, Oracle Financial Services & Sameer Singh, Consulting Technical Manager, Oracle Financial Services

Since introducing our first post in this series, many banks have joined the data governance conversation, indicating sentiments in regulatory remarks on BCBS 239 that have spawned their journey. In this blog, we’ll cover the approach and capabilities the G-SIB (Globally Systemic Important Bank) realized when implementing the Oracle data governance solution, including the following out-of-the-box features that any financial institution can leverage:

  • Variance analysis with drill-down capabilities, threshold breaches, and dynamic reporting capabilities **
  • Adjustments facility for making top-end adjustments immediately after ledgers are reconciled at various periodicity
  • Data quality, process monitoring, and operational dashboards
  • Data lineage from left to right – depicting the various hops and transformations from a system of records to the final reported numbers for each MDRMs (Micro Data Reference Manual) (Cell Identifier) **

** Visual illustrations provided at appropriate places.

Setting the data life cycle strategy

Without an overall strategy in place, data quality, control and governance will remain at certain levels within the organization, resulting in localized data knowledge and expertise. Ideally, data should be captured from various source systems, ingested into a data model which is further consumed for the management or regulatory reporting, and finally expended for meaningful analytical insights. This enables data transparency at an enterprise-level, avoiding the all-too-common inability to understand the “black box” behind the mechanics of specific data issues and transformations.

In this case, the bank was grappling with their controller and analyst teams having heavy involvement in manual number crunching exercises post-report filing and had to deal with:

  1. Significant delays in getting to the lowest grain of data (instrument level)
  2. Human errors while providing the reconciliation of the numbers

Key Roles in a Financial Institution’s Regulatory Reporting Division

Roles

Key responsibilities

Controllers

Process owners of reports, schedules of reports, certain lines of a program (s) etc.

Reporting Analysts

Junior associates involved in number crunching exercise concerning pre- and post-reporting submission activities.

Data Analysts

Data owners, whether source or line of business data custodians.

Reviewers

Senior associates act as reviewers or approvers to the adjustments, checks the authenticity and verification of the reporting before filling.

Creators

Associates who are involved in the creation of adjustments and other miscellaneous activities involved in the reporting process.

See visual for context on the overall data flow and the data governance solution. In this blog, we focus on the last hop, the Oracle Data Governance solution.

When implementing the pilot at the bank, work efforts were executed broadly under two groups: (i) configuration & operational related activities and (ii) review & validation of dashboards.

At-a-glance: The dashboard

The dashboard depicts variance analysis period over period. With the flexibility to choose their period for analysis, the bank could view the data across various dimensions. They used the dashboard to further drill down to the instrument-level, providing comprehensive insights to the analyst team.

To view how the numbers reconciled bottom-up and the accuracy of the Oracle Data Governance solution, the following drill-down capabilities were shared with the controllers and the analyst team.

Now the variances in MDRM could be analyzed from various cross-sectional views, even to the most granular level of analysis. This granularity captures insight into which instruments or accounts led to the differences in the MDRM across the stated periods.

The legacy regulatory report filing system the controller teams used for variance analysis had inherent limitations in flexibility in slicing and dicing data across various periods. With the Oracle Data Governance solution, the bank had seamless integration between the Regulatory Report schedules and data governance dashboard views. Any analyst could easily transition from the report line item to the higher-level variances and further drill down to the lowest level account variances.

Reconciliations and adjustments

When it came to changing and reconciling the numbers post ledger, the bank had a very convoluted and manual process. Adjustments to the reporting numbers period over period created non-compliance of the Committee of Sponsoring Organizations of the Treadway Commission (COSO) framework, adopted by the bank for data control. The banks’ internal audit team highlighted the following pain points in their current operations:

  1. Adjustments at every hop and by every other stakeholder-led to confusion
  2. Top-end, pencil manual adjustments done last minute before filing, were outside the Oracle data model, and through manual templates directly into the Regulatory Filing layer.
  3. Auditability of the adjustments by the Fed became difficult and more time consuming
  4. Lack of transparency led to double counting and additional resourcing of time

To address these concerns, we introduced the direct posting functionality from the data governance solution. We advised the bank to have a unified approach toward the adjustments while adopting the following strategy:

  1. Implement a two-layered approach by creating routine or systematic adjustments during review and make management adjustments just before regulatory filing
  2. Use the direct posting functionality for all adjustments before filing to ensure auditability and transparency for internal and external auditors regarding COSO compliance. This gives the Federal Reserve complete transparency of the final reported numbers
  3. Employ a Four-eyes principle in which there is an authorization matrix of creators and approvers review/approve every adjustment the bank adapts to its reporting numbers
  4. Make any last-minute adjustments right before the filing by way of pencil adjustments (i.e., can use an application such as Vermeg for reporting the numbers in the Fed Reserve systems in an encrypted format)
  5. If the instrument-level data requires adjustment, then the process would initiate from the data movement (as mentioned in the data life cycle strategy section)

The bank’s controller teams used the direct posting functionality to determine the various types of adjustments applied to a particular MDRM. This helped satisfy one of the different compliance items prescribed by the COSO framework. The data governance solution provided confidence to the external auditors and Fed Reserve on the transparency of the adjustments applied to a particular reporting number for an MDRM.

Achieving incremental success

The bank successfully enabled new data governance capabilities, achieved their essential requirements (mentioned in the first blog of this series), and instilled confidence among key stakeholders. The bank had more visibility and transparency into the entire adjustments process by adopting a centralized approach to regulatory reporting. They minimized the number of adjustments made to the data before regulatory filing and provided more transparency to both management and external auditors. The value realized from the initial program engagement led to exploring additional data governance capabilities, including data quality controls and data lineage.

The Oracle Data Governance solution elevates an organizations’ ability to target continuous reductions in required adjustments, alleviating the most mundane and time-consuming – yet critical components of the regulatory reporting process.

Stay tuned for part 3 to read more on how the G-SIB data governance story unravels.

My colleagues Ravishankar Narayanan, Sameer Singh & 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.

For more information, please visit:
Oracle Financial Services: oracle.com/financial-services

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