On March 31 2022, the Australian Prudential Regulation Authority (APRA) laid out its five-year data collection roadmap. APRA has started to formalise its intent to collect deeper, broader data sets from the regulated industry through Comprehensive Data Collections, replacing the returns and forms-based approach which has dominated the regulatory reporting landscape in Australia since APRA's inception in 1998.
The move to richer, more detailed data collections will coincide with a transition away from APRA’s D2A data collection system to the new APRA Connect portal. This transition will impact all industries supervised by APRA in different ways and at different times. APRA published a tentative roadmap for each industry separately (Banking, GI, Life , PHI and Superannuation), which will be subject to change based on industry feedback.
For the Australian ADI industry, APRA has laid out a plan to introduce a Comprehensive Data Collection over a 5 year time horizon.
For all banks operating in Australia, the Comprehensive Data Collection will be a set of granular tables in a predefined data model structure, collecting granular information on bank's key portfolio's such as lending, investments, deposits and funding products. This will include product and risk characteristics, collateral and customer demographics, down to account and customer level.
In the short-term (2022/2023), there are no major changes for ADI's, who are already well-progressed in their implementation of the interim capital collections (ARS 110, 112, 113) under the revised capital framework. However, in the 2 to 5 year horizon, APRA intends to overhaul all of its current form-based collections, starting with the Comprehensive Credit Collection (CCC).
APRA's Comprehensive Credit Collection is proposed to be introduced in a 5-phase approach, with a focus on the mortgage and agricultural lending book in 2024, followed by provisioning, non-financial risk on assets, commercial property (Phase 2) and Credit risk capital (Phase 3) in 2025. Credit Phase 4 is proposed to include securitisation, counterparty, off-balance sheet and international banking statistics in 2026 and the final phase 5 will include any remaining asset data elements currently collected in the EFS data collection, in 2027.
Ultimately - APRA intends to have the granular data collection covering all banking assets, fully implemented, by 2027, replacing virtually all current APRA returns which focus on banking products (assets).
🔊 Note that the strategic ARS 220 data collection, which was originally announced by APRA for Q1 2023, will not be implemented in its original form - and is being replaced by the Comprehensive Credit Collection. The interim asset quality return will remain in force until further notice.
Apart from the Comprehensive Credit Collection, APRA also intends to introduce a Comprehensive Liabilities Collection which will cover liquidity, Financial Claims Scheme and statistical reporting in a first Phase in 2025 and EFS liability data in a second phase in 2027. APRA intends to consult extensively with industry participants on the level of information that will be collected under this new collection.
APRA also acknowledged that there will remain a set of specific collections in areas such as market risk, interest rate risk in the banking book and financial statements which are likely to remain at an aggregated level.
What does this mean for your organisation?
Whilst APRA's direction toward granular collection of data has been made clear for some time, entities may find the roadmap remains at a high-level and remains vague on detail and practicalities. APRA has established industry working groups and will consult extensively with industry bodies and entities directly as the regulator firms up their requirements.
APRA's publication of its 5 year roadmap gives entities a clear direction of where the regulator is headed. And while the practical details are yet to be worked out, nothing should stop banks from laying the foundations of establishing high quality data assets for regulatory reporting:
well-governed (clear roles and responsibilities and ownership of data),
controlled (managing data risk throughout the data lifecycle),
documented (lineage, glossary, traceability),
monitored (data quality metrics, exception management).
Guided by CPG 235 - which for a long time has been earmarked to become CPS 235 in a similar vain as CPG 234/CPS 234 a few years ago - entities should start the time and resource-intensive exercise of laying their data management foundation.
Banks of any size, domestic and foreign, should be clear that meeting their obligations of APRA reporting (regulated by FSCODA) in 5 years time will look dramatically different from today. They now have both the obligation and the opportunity to make their homework and to put their house in order. They should envision their "target state" blueprint and establish their internal delivery roadmap. Banks should be looking to establish, or inform, their data strategy business case by the clear direction laid out by the regulator, and socialise the impact at senior executive and board level.
Regulatory change is a catalyst, which can be treated either as an opportunity or as a burden. Entities who look beyond the regulatory obligation will see that establishing trusted data assets is not just good for the regulator, it is also good for business.
Whether you work for a large domestic ADI, or for a small branch of a foreign bank, APRA's comprehensive data collection will fundamentally transform the way your organisation shares its data with the regulator. Subscribe to our mailing list to receive regular updates and invites to our industry webinars and roundtables, as we support the industry in navigating this change by turning regulatory obligations into strategic opportunities.