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From Regulatory Reporting to Recurring Data Collection – How GFC transformed the landscape of financ

“Go beyond fairy tales because the devil is in the details” - regulators around the world have started realizing the importance of going deeper than the mere “sums & differences” reported in submissions from their regulated entities. Learning lessons from the global financial crisis (GFC) of the last decade, they know that the practice of collecting information through reports that are aggregated at highest-levels is not as prudent as was widely believed before the crisis.


The lack of regulator’s ability to see-through the reported data vastly hindered their ability to spot changing market dynamics, excessive risk taking trends or any unfair business practices undertaken by firms under their jurisdiction.


With the aggregated data reporting in reports, it was also not uncommon for the industry players to track back on their reported figures by changing & re-submitting them. Regulators (albeit annoyed) could neither effectively curb the re-submissions of returns nor could they identify the root-cause or issues locked within the underlying data of the re-submitting entities.


It wasn’t merely because of the convenience involved in collecting only a handful of files from complying entities but the lack of safe & efficient technology to periodically collect larger chunks of data; that was also holding the regulators back from imposing transactional data submission requirements.


However, with the advancement in technology and changing times post-GFC that demanded more prudence from regulators; recurring data gathering practices at transaction levels were initiated in multiple jurisdictions.


The European Central Bank (ECB) in 2011 proposed to kick-off transactional data collection of deposits and loans to non-individuals under the project named AnaCredit (analytical credit datasets). Under the requirement, all lenders operating in the Eurozone are obliged to submit about 100 data attributes at instrument/deal levels for the loans against entities that when aggregated, crossed a €25,000 threshold. The project reportedly came into practice with the first stream of data collected in September 2018 by the national supervisors further transmitted to the central data repository of ECB.


Another massive transaction data gathering exercise that was initiated in the aftermath of GFC is the G20 OTC Derivatives Market Reforms. The largely unregulated OTC derivatives around the world were attributed to be the biggest cause of financial distress in economies around the globe. Therefore, G20 nations collectively committed to mitigate systemic risks in the OTC markets by encouraging the growth of standardised and centrally cleared derivative deals and the collection of transaction level reporting through licensed or prescribed trade repositories.


One of the globally realised phenomena is that, although regulators perform an effective job of supervising & controlling the financial entities, they have failed at several fronts in effectively protecting the end consumers’ interests. Therefore, one common theme among all the granular level data collection programs being implemented across the globe is the regulators’ intentions of deriving analytical insights from gathered data that would help them form policies to not only enhance the financial markets’ efficiency & transparency but also protect the interests of consumers in the market.


THE RECURRENT DATA COLLECTION PILOT PROGRAM OF ASIC


The Australian Securities and Investments Commission (ASIC), Australia’s corporate, markets and financial services regulator; recently introduced its pilot program to collect Mortgage as well as Managed Funds’ transaction level data on a recurring basis.


This initiative to collect transaction level data from Mortgage lenders as well as Fund Managers aims to:


  • support its decision making on the basis of data-derived facts & evidences

  • stay ahead of the curve in understanding changing dynamics within financial industry

  • spot the emerging trends, risks as well as opportunities to regulate the market participants

  • protect interests of financial industry consumers