Mr Röseler, why do you want to modernise the reporting system?

For one thing, the reporting system has become exceedingly complex in the last few years – for the institutions and for us. This has to change.

There is the time factor: we have an unbelievable mass of reporting requirements. Banking supervisors, banking statistics and resolution authorities – they all want information, and they all impose their own requirements. This development has taken place organically, over time. And the situation is not likely to improve in the foreseeable future: the introduction of the CRR III and the EU Taxonomy will increase the reporting burden even further. Then there are the costs: the reporting system is expensive. Banks across the EU spend about 20 billion euros on reporting every year. This figure does not even include the supervisors’ expenses.

Our second reason is the fact that our present reporting system is too rigid. There are times when this causes us to lose time unnecessarily. Whenever something happens on the market and we want to investigate right away, we nearly always have to consult the institutions on the matter. Those are not the analytical capabilities that we supervisors dream of.

A reformed reporting system, the way we envision it, would increase our flexibility in responding to such events. We would be able to access the data we need, at any time, and to analyse this data without any unnecessary delay. This would also make stress testing less complex.

What motivated you to commission your own study along with a prototype?

We wanted to take the initiative: to actively shape the future, not just have a supporting role. There are more than enough theoretical approaches and concept papers. It was important to me to ensure the combination of theory and practice. We also did not have to start from scratch. We used BIRD , a data model that already exists, to develop a prototype that maps the entire reporting process. We were thus able to demonstrate that we could use BIRD as a nucleus for the redesign of the reporting system.

The plan, from the beginning, was to fundamentally rethink the reporting system. And the prototype has shown that our approach works.

What are some of the changes you are suggesting for the reporting system?

As I said before, we want to reform the reporting system comprehensively, and not simply make adjustments here and there. We are aiming high – to achieve a reduced burden for institutions and supervisors, and improved analytical capability for us.

Our target model is based on a mixed granular data model that could encompass reporting requirements from all reporting domains in the future. In other words, in addition to granular data, the model also holds some aggregated data that cannot be expressed on the granular level. At some point, we will be able to dispense with the various template-based requirements.
The higher data granularity will then open up new analytical possibilities.

What has BaFin learned from the granular data?

The higher level of granularity makes our analyses more up to date and more accurate and improves the quality – a great boon, especially in difficult and fast-paced times like these. We will be able to take a much more individualised and differentiated approach to identifying risks. The granular data level means there can be totally new evaluations. The prototype enables us to see, with just one click: Which customer is driving the risk ratio? What business contributes the most to the capital requirement? How high is the default rate at the institution?

BaFin could also set up its own early warning indicators – without any additional effort on the part of the banks. We could also see: Which banks have been particularly affected by the pandemic? Which customers have already defaulted? What collateral has been affected by a flood – such as the one in the Ahrtal region? All this could be visible to supervisors, with just a few clicks. In addition, the interaction between supervisors and institutions would improve significantly, since both groups would use the same data model. There would no longer be any need for translation between different data models.

Which banks participated in the pilot?

Reporting is an issue that affects all banks. We were therefore careful to ensure that the participating institutions represented the entire sector as much as possible. And we obviously also wanted to engage data centres and the associations. The study involved a total of more than 30 participants, representing supervisors and institutions. These included, for example, Sparkasse Leipzig, Volksbank Mittelhessen, Commerzbank, the Association of German Banks (Bundesverband deutscher Banken e.V.) and the National Association of German Cooperative Banks (Bundesverband der Deutschen Volksbanken und Raiffeisenbanken e.V.).

But even if a reform produces benefits – would it also be economically viable?

There will not be any cost reductions straight away; in the longer term, however, we will see costs fall. We will be able to create major relief especially by leveraging additional potential features. The study has helped us to identify a number of such possibilities: for example, introducing standardised, consistent central master data, but also gradually implementing centrally run methods.

What happens next?

Once we had developed the prototype based on the BIRD data model, it was clearly time to promote our target model among our European partners. It had certainly proven to be practical. The issue will definitely have to be tackled at the European level. BaFin and the Bundesbank have held several discussions with the European Banking Authority, the European Central Bank and the EU Commission. The feedback has been consistently positive. All the parties involved are motivated to play an active role in shaping the reporting system of the future, at the same time knowing it will be a daunting task.

It is now time to synchronise the elements at EU level. The key players need to sit down together and, in collaboration with national competent authorities, develop the reporting system of the future.