Message from the CEO, Nina Schindler
The growing complexity of the regulatory framework in an increasingly intricate economic environment boosted the need for data exponentially. The reporting and public disclosure of a surging amount of high quality data, almost daily, has become essential for banks, supervisors, central banks, as well as all other market participants and stakeholders.
Providing the large amount and variety of data at increasingly shorter intervals has become a challenging task for organisations, which have to invest in infrastructure, tools, and talent. The simplification of reporting requirements and of the relevant procedures, and the deletion of redundancies and duplications in the area of reporting are therefore a key concern of our members and rank high in our advocacy agenda.
In this vein, we have strongly welcomed the Commission's proposal aiming to simplify legislation and ease the administrative burden, with targeted changes that draw on experience in implementing legislation to rationalise reporting requirements. We equally very much appreciate the approach of the European Parliament to drive these ambitions even further.
In particular, facilitating the exchange of information between financial sector authorities is a much needed first step towards a data eco-system where entities report data only once to one authority. Ensuring that data is shared and reused as needed by the various authorities overseeing the EU financial system will be conducive for improved policy design, replacing duplicative reporting by a reporting approach that is more efficient, resource-friendly and future-oriented.
We believe this is a great example of “better regulation” and the starting point for more initiatives of this kind.
3 Questions to Mr Othmar KARAS, Member of the European Parliament
Mr Othmar Karas is First Vice-President of the European Parliament since 2022. He is also Rapporteur for the Reporting Reduction and Data Sharing Regulation and has been Member of the European Parliament since 1999. He holds a diploma and doctoral degree in political science (University of Vienna) and a Master’s degree in European and international business law (University of St. Gallen) and has worked intermittently as a lecturer at Austrian universities since 2007.
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- What is the Reporting Reduction and Data Sharing Regulation?
This bureaucracy reduction package in the financial markets was put forth by the European Commission on 17 October 2023. As the Rapporteur, I am pleased that in the European Parliament we negotiated this important package in record time in order to enable its adoption before the European elections on 6-9 June 2024. The common goal is clear: We want to cut red tape in the financial sector and show that the European Union is always working to eliminate unnecessary bureaucracy and inefficient reporting requirements. The two main objectives are reducing double reporting through more data sharing between competent authorities as well as more proportionate reporting obligations by increasing the competencies of supervisors.
- What are the key points of the European Parliament negotiating position?
The European Parliament is significantly expanding and improving the European Commission's proposal: Firstly, double reporting and duplicate reporting requirements must be a thing of the past thanks to more information sharing between supervisory authorities. In future, companies should only report to supervisory authorities if the same information has not already been reported to other authorities. Secondly, the European Parliament is targeting so-called 'gold plating' – the over fulfilment of EU legislation by means of national transposition – through new competencies for the supervisors. Thirdly, the European Parliament wants to enable businesses to report any remaining duplicate and disproportionate reporting requirements digitally in order to eliminate them once and for all. With these steps, the European Parliament wants to strengthen the internal market and the competitiveness of European companies.
- What are the next steps in the legislative procedure?
On the 29th of January, the Economic and Monetary Affairs Committee of the European Parliament unanimously voted in favour of the mandate for inter-institutional negotiations with the Council of the European Union, comprising all EU Member States. Regretfully, after a first working party in February, the Council will not be able to finalise its General Approach in time to allow for concluding trilogue negotiations this legislative term. As a reaction to this, the European Parliament will put their Committee Report to vote in order to close the first reading. Now, the ball is in the court of the Council. Of course, in theory, the Council could immediately simply approve the European Parliament’s position, thereby adopting this important package to cut red tape in the financial sector. But in any case, the Member States need to act urgently to reach our common goal of reducing bureaucracy.
Second Opinion from Mr Mike VELTHAAK, Senior Advisor to the Board, Rabobank
Mr Mike Velthaak, advises the Board of Rabobank regarding topics that are related to the Banking Union and Capital Markets Union. He is member of the General Assembly of the EACB, as well as chairman of the EACB Banking Regulation working group. Furthermore, he participates in the EACB banking recovery and resolution working group and the EBF statistics & reporting working group. He has a seat in the BIRD (ECB) steering committee. Finally, he fulfils similar roles representing Rabobank within the Dutch Banking Association.
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In the aftermath of the Great Financial Crisis, Europe created the European Supervisory Authorities as well as the Single Supervisory mechanism (SSM) and Single Resolution Mechanism (SRM), each setting their own reporting requirements. When looking at the digital developments over the last decade, it’s not a surprise that supervisory reporting obligations for banks towards these supervisors have massively increased.
As data storage and processing costs decreased significantly overall, an ever growing volume and granularity of data being requested by the ESAs was noticed, to monitor financial stability and monetary policy. I also noticed however, that legislation is lagging behind. Digitalisation in general and banking in particular requires EU aligned data definitions and a harmonised data model. But currently data definitions set by the ESAs and ECB are not aligned. Non-aligned data definitions increases the burden on both banks as reporting entities and supervisors as receivers of those data. In addition to the regulatory reporting requirements, various ad-hoc requests and one-off exercises (stress tests, deep dives, ad-hoc data collections, monitoring) add up to the cost of the reporting requirements.
The 2023 legislative initiative from the Commission, is a much welcome development in what I see should be a structured process of looking comprehensively at existing reporting requirements in a digitalised world, with a view to assess their continued relevance and to make them more efficient.
As data quality is consistently looked at among supervisory priorities, it is key that the overall structure and content of reporting requirements is streamlined. In this regard, the idea to consistently enforce the ‘report once’ principle is paramount. I fully subscribe to the approach outlined that supervisors should only request information from institutions if these have not already reported that information to other authorities. It is a welcome step that the European Parliament included all authorities responsible for supervision in the financial sector, including the ESRB, the ESAs, the AMLA, the SSM, the SRB, as well as all respective competent, supervisory and resolution authorities in the Member States, in the scope of the amending Regulation.
Another element that I see crucial is the call for authorities to regularly review the reporting and disclosure requirements and propose, where appropriate, to streamline and remove redundant, obsolete or disproportionate requirements. This will help in keeping the overall framework relevant and coherent, and will be conducive for cost effectiveness.
Data collection is a tiresome and costly process for any bank, it is therefore encouraging to see that in addition to the 2023 legislative initiative from the Commission, multiple other initiatives have started to bring a more streamlined approach to the reporting framework. In this regard I can mention the developments that EBA has brought about to update their data model to the so called DPM 2.0. I’m also happy to see that EBA, in close cooperation with the ECB and other ESAs, have started to set up the Joint Bank Reporting Committee. This initiative should boost significant progress with regard to the consistency of supervision data and the creation of a European common prudential reporting data dictionary. It’s however a pity that this is not formally captured in EU legislation and we believe that the banking industry should be duly involved and adequately represented in this process.
Another initiative is the Integrated Reporting Framework (IReF), started by the European System of Central Banks (ESBC) to minimize the trouble connected with reporting and delivering high-quality statistical data to the ECB and supported by the Integrated Reporting Dictionary (BIRD). However, also here we note that when no legislation is created, its difficult to find a party who take full responsibility over the BIRD, making it for banks uncertain to invest in this initiative as nobody will rubber stamp the outcome of the data model. We also are afraid that by having EBA their DPM 2.0 and the ECB their IReF, banks are still confronted with two data models instead of one, keeping the cost of prudential reporting high.
Nonetheless, the growing awareness of how important it is to design a digitalised reporting environment that is efficient and streamlined, minimising requirements’ duplications and overlaps, represents a major step forward towards policy design that is proportionate and fit for purpose.