Potentials of AnaCredit
In the past, banks in Europe were monitored by the respective national supervisory authorities only taking into account of national supervisory law. With implementation of the single supervisory mechanism (SSM) in November 2014, the European Central Bank (ECB) for the first time received sole responsibility for control and regulation of all banks in the eurozone.
Collection of statistical data relating to the loan portfolio had so far been regulated only in a few European countries with differing requirements. As a result, reports concerning the loan portfolio could be collected only partially at the national level, and were either difficult or impossible to aggregate at the European level. Introduction of the analytical credit data set (AnaCredit) and planned establishment of a central credit register (CCR) are meant to optimize tasks related to monetary policy and financial market stability at the European level, the objective being early identification and counteraction of systemic risks.
What exactly is AnaCredit?
The ECB decision dated 18th May 2016 ordained the implementation of AnaCredit, in which process detailed data about borrowers, credit transactions and their risk assessment are to be reported to the national supervisory authorities.
Specifically, there is a reporting obligation if
- the sum of all a creditor's outstanding debts at an institution >= € 25,000 and
- at least one of the debtors is a legal person and
- the relevant financial instrument poses a credit risk (defined by ECB/2016/13).
The debtor's headquarters is irrelevant here. What counts only is that the loan was taken within the eurozone.
Note at this point:
Detailed data on legal persons must be reported; in the case of natural persons, only their participation must be reported anonymously.
Reporting should cover a total of 95 fields from the following areas:
(for details also refer to AnaCredit Reporting Manual)
Whom does AnaCredit concern and what are the requirements?
In principle, AnaCredit reports are to be submitted by
- all institutions headquartered in the eurozone, and
- all institutions with a branch office in the euro zone.
Because fulfilling AnaCredit requirements poses a great challenge to many institutions, however, the following reduced requirements apply in Germany:
- For small institutions (currently 750 with an equivalent total credit volume < 2% of national AnaCredit volume), only 17 of 89 fields must be reported for existent loans, and 26 of 89 fields must be reported for new loans.
- Omitted for all banks in the case of existent loans are 17 fields from the areas comprising customers and contracts; however, they must be updated in the case of new agreements.
Subsidiaries outside the eurozone must submit 13 fields less.
Challenges in the implementation of AnaCredit
Timetable for the introduction of AnaCredit
The first stage of AnaCredit is meant to be fully productive from early October 2018. Based on the challenges posed by the first stage, the remaining reduced requirements as well as a "penalty free" introductory period, however, it will not be possible to finish the first stage punctually everywhere.
An extension of financial instruments, in particular, is currently planned for stages 2 & 3.
Creation of a data and BI landscape for AnaCredit
The introduction of AnaCredit poses a major challenge to each concerned institution, also taking into account any reduced reporting requirements.
Challenges for the core banking systems:
- Extension of core banking systems by the AnaCredit fields additionally needing to be registered
Challenges for the BI landscape
- Creation of a unified analytical platform for supplying the reporting system with consolidated, quality-controlled data which can be validated
- Processing of large amounts of data
- Consolidation of data from different core banking systems
- Consolidation of data across branch offices
- Identification and merger of customer data / borrower units
- Extension of analytical systems by additional AnaCredit fields
- Delivery on time
- Clear separation of national reports
Governance & strategy
- Clear strategy for establishment of BI and central use of data within the institution
- Establishment / reinforcement of data governance organization to ensure common definitions (metadata management) and data quality
What does a possible architecture look like?
The architecture for data supply and processing can be split roughly into two possible scenarios.
All core banking systems deliver in a BI landscape which consolidates the data and makes it available via a presentation layer for extraction to the reporting system.
- Simplest possible model for smaller institutions or strongly centrally-driven institutions
- All information is available in a homogeneous, comparable and valid form on the basis of the presentation layer, also to other BI applications
- Consideration of BCBS239 is easily possible
- For large institutions with many subsidiaries, in particular, central consolidation is a major challenge and difficult to realize
- Data governance organization and data strategy must be very strong and have great support in the management, especially for large organizations
Decentralized scenario with central consolidation
A financial institution consists of several subsidiaries or branches, which in turn have their own IT and BI infrastructure. Data for the reporting system are already consolidated there and forwarded to the parent group or a managing company for overall consolidation and reporting.
- This scenario is often the only possible variant for complex group structures
- Frequently changing conditions of participation can be flexibly mapped
- The managing company must ensure the ability to link partial BI architectures through assertiveness and good communication
- Overall quality and reporting time frames are difficult to ensure
- Consideration of BCBS239 is difficult (transparency, documentation), violations of corresponding principles are likely
Synergy effects through more efficient project management
AnaCredit is a regulatory requirement based on several topics whose implementation has been addressed in recent years. It is not surprising that many topics are inter-related and result in synergies if corresponding implementation has already taken place. Accordingly, the following are directly affected in terms of regulation:
BCBS239 implementation has been a task for banks for some time now. Once this concept has been fully realized, it can be assumed that the necessary changes in data strategy as well as data governance will already have been performed. Central DWH, the necessary end-to-end transparency and monitoring of changes affecting the entire process chain are guaranteed.
This is also an independent topic which plays an important role, in particular, for risk assessments of banks operating at the European and international levels, and is a prerequisite for AnaCredit in these cases.
Because AnaCredit is intended for consolidation in the reporting system, a consolidation of similar reports (e.g. large-scale loans) in the German banking sector is to be assumed in the long term, even if not yet decided. Which opportunities arise through the use of AnaCredit?
Strict introduction and sustainable implementation of data governance as well as data strategy measures in the BI environment as well as related IT systems and departmental processes result in challenges as well as opportunities.
Long-term cost savings arise in many cases through:
- Avoidance of expensive faulty decisions based on incorrect, contradictory or incomplete evaluations
- More transparent and comprehensive view of customers, e.g. through an overall financial overview, and more efficient lending as a result
- Establishment of a robust infrastructure allowing agile and flexible adjustments