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Regulatory Reporting - Best Practices

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  • 1. Regulatory Reporting - Best Practices Copyright by RPS Recovery Portfolio Services Ltd. London - United Kingdom 2014/2015
  • 2. Legal Guidelines of Regulatory Reporting CRD - Capital Requirements Directive CRR - Capital Requirements Regulation CoRep Common Solvency Ratio Reporting FinRep Financial Reporting ITS on reporting (ITS = Implementing Technical Standards) CP50 = Solvency Reporting CP 51 = Large Exposure reporting Data Point Model Copyright by RPS Recovery Portfolio Services Ltd. London - United Kingdom 2014/2015
  • 3. Objectives of Regulatory Reporting ‣ What are the objectives of regulatory reporting? ‣ What are the pitfalls? ‣ How to mitigate the pitfalls? Copyright by RPS Recovery Portfolio Services Ltd. London - United Kingdom 2014/2015 Scope of Regulatory Reporting Regulatory-reports are collected for many purposes, for example: ‣ Monitoring of security and solidity of individual legal entities ‣ Monitoring of systemic risks in Banks, Insurance companies and in the sector of Financial Services generally ‣ Monetary policy (reviews and transactions) ‣ Cross-border cash-flows (Country positions and individual exposures) ‣ Compliance
  • 4. Pitfalls ‣ Lack of unterstanding of the regulatory requirements ‣ Insufficiant differentiation of responsibilities within the legal entities ‣ Missing communication between the involved Business Units and/or IT Departments ‣ Poor data quality and numerous classification errors ‣ Insufficient customising with the manufacturer of external reporting software ‣ Missing communication with the authorities Copyright by RPS Recovery Portfolio Services Ltd. London - United Kingdom 2014/2015
  • 5. Best practices ‣ Process automation ‣ Precise description of business needs and effective documentation of the results ‣ Process and data controlling ‣ Strong communication between all involved units and authorities Copyright by RPS Recovery Portfolio Services Ltd. London - United Kingdom 2014/2015
  • 6. Automation ‣ Data are only as good as their source ‣ Qualitiy of data collection at the Front office ‣ Regulatory reporting software as an interface to financial accounting ‣ Minimum of manual adjustments ‣ Limited use of separate tables ‣ Business solutions for reporting - external reporting software ‣ Is the reporting software compliant with the regulatory requirements ? ‣ Will the software be adapted regularly? ‣ Is the software user-friendly and clear to the reporting unit? Copyright by RPS Recovery Portfolio Services Ltd. London - United Kingdom 2014/2015
  • 7. Documentation ‣ Processes for the preparation of any reports must be fully documented and be available ‣ Reconciliation and adjustments must be documented clearly and understandably ‣ Product descriptions as well as the accounting and valuation methods must be clear and accessible to all those responsible Copyright by RPS Recovery Portfolio Services Ltd. London - United Kingdom 2014/2015
  • 8. Controlling & Authorisation ‣ Prior to the submission of the reports the data must be checked (including a management review) ‣ Daily monitoring is essential because it prevents inconsistencies such as, for example, the exceeding of individual large credit limits ‣ Unusual and significant changes / variations must be documented and adjusted as needed ‣ Permanent analysis of the reporting systems Copyright by RPS Recovery Portfolio Services Ltd. London - United Kingdom 2014/2015
  • 9. Communication & Study ‣ Close cooperation with the involved divisions and the audit (internal and external) ‣ Stay in any ways up to date even if it seems as it will not affect your work directly ‣ Talk regularly to the Management and the IT Department and make possibly adjustments, complex facts must be strictly documented ‣ Get involved yourself in the design process of the reporting software ‣ Regular check of relevant websites in order to include changes in the reporting process timely Copyright by RPS Recovery Portfolio Services Ltd. London - United Kingdom 2014/2015
  • 10. Internal Guidelines to the Reporting Definition: Methods and procedures, the reasonable assurance provide for legal correctness. Prevention Policies and procedures in order to avoid errors. Detection Policies and procedures for the detection and correction of errors that could possibly prevent the execution of the respective process (analysis and review of regulatory reports). Copyright by RPS Recovery Portfolio Services Ltd. London - United Kingdom 2014/2015
  • 11. Review & Approval ‣ Management Review and authorisation of the regulatory reports Because of inadequate reviews and approval processes errors can be overlooked. Best practice A review of the reports should be performed by a senior executive in order to uncover potential problems with data. Copyright by RPS Recovery Portfolio Services Ltd. London - United Kingdom 2014/2015
  • 12. Interpretation of the instructions to the reporting ‣ Understanding the instructions - relationship between regulation and public financial reports Limited understanding of the regulatory statements and lack of compatibility between the reporting requirements and the final content lead to inaccurate reports. Best practice To read the specifications of all regulatory reports and to compare them with the authority instructions is absolutely necessary. This ensures that all data in accordance with the instructions will be transmitted. The written instructions of the supervisory authorities shall apply. Copyright by RPS Recovery Portfolio Services Ltd. London - United Kingdom 2014/2015
  • 13. Documentation of Reporting Policy Handbook Inaccurate written description of procedures lead to inconsistent practices between employees and to unreliable reports. The manual makes sure the rules and general conditions to ensure the uniformity and standardisation. A process manual should contain the following: ‣ The procedure for all regulatory reports ‣ An adequate description for any changes or adjustments ‣ Process descriptions for new and/or complex products and how these can be checked from a regulatory perspective Copyright by RPS Recovery Portfolio Services Ltd. London - United Kingdom 2014/2015
  • 14. Culture of Responsibilities Company-wide awareness and engagement in the reporting process: ‣ Regulatory Reporting Business Units ‣ Accounting and Valuation methods ‣ Transactionen ‣ Information Technologie Copyright by RPS Recovery Portfolio Services Ltd. London - United Kingdom 2014/2015
  • 15. Information Technologie - Data Retention Individual responsibilities for reporting data can not be provided in legal requirements. It is the decision of the company how the historicisation of data takes place, and especially what periods of time it needs. Best practice The reporting management should assign the roles and responsibilities to "Data owner". Such a ‚data mentor' or ‚data owner‘ has the responsibility to control the data base regularly and to discuss any detected inconsistencies with the business lines early. Copyright by RPS Recovery Portfolio Services Ltd. London - United Kingdom 2014/2015
  • 16. Quality Assurance Quality assurance (QA) comprises the processes to review and improve the integrity of the data for reporting. The effectiveness of quality assurance is directly connected with... ‣ the technical and business knowledge of QA staff ‣ the understanding and long-term commitment of the Management for quality assurance Best practices ‣ QA staff should be independent of the company and the reporting responsibilities ‣ QA staff are technically competent and able to demonstrate entrepreneurial skills ‣ QA review procedures are standardised across process boundaries and adjusted as needed ‣ Appropriate mechanisms are in place to detect weaknesses to enforce corrections for certain errors Copyright by RPS Recovery Portfolio Services Ltd. London - United Kingdom 2014/2015
  • 17. Thank you very much indeed for your attention. Copyright by RPS Recovery Portfolio Services Ltd. London - United Kingdom 2014/2015 RPS Recovery Portfolio Services Ltd. Becket House 36 Old jewry London EC2R 8 DD United Kingdom e-mail: office@recovery-portfolio-services.co.uk