Before we get started… what is IReF?
The IReF or Integrated Reporting Framework is the future single reporting framework for ECB statistical reporting.
Most statistical reporting finds its origins in the same overarching European regulations such as AnaCredit, SHS, MIR and BSI regulation. Although these regulations are defined at European level they are implemented heterogeneously in each national jurisdiction. Today, banks are confronted with different data models, exchange formats, submission deadlines and overlapping data requirements across the different regulations and jurisdictions. This situation creates inefficiencies for supervisors in terms of data collection and for banks in terms of cost of compliance.
Source: ECB 2021, The Eurosystem Integrated Reporting Framework: an overview
IReF is the ESBC initiative for creating a common and harmonised data collection throughout the eurozone to replace the numerous national reportings and data collections.
“The aim of the IReF project is to integrate the Eurosystem’s statistical requirements for banks into a single standardised reporting framework that would be applicable across the euro area and might also be adopted by authorities in other EU Member States. This will help automate data processing and enhance data quality”.EBC, 2022
The overall goal has been reflected in the paradigm: “define once, report once”.
The main concepts of IReF are very similar to the AnaCredit approach and based on a ERM approach with interlinked instruments, counterparties and protections datasets.
Other initiatives in the area of integrated reporting frameworks are the DPM (DataPoint Model – repository representing the uniform and consistent definitions of reporting and disclosure defined by supervisors like EBA) and the BIRD (Bank’s Integrated Reporting Dictionary).
Currently ECB and EBA are working towards a common data dictionary for statistical, prudential and resolution purposes. This implies as well that the DPM model as currently used for EBA reporting will be assessed on its fit-for-purpose for IREF reporting.
Frameworks in scope
When will the IReF will be applicable?
The current expectation is for the IReF regulation to be published in 2024 for an expected to go live in 2027. The work has already began in each jurisdiction to identify the impacts of IReF in terms of national reportings that could be discontinued.
A paradigm shift for banks
The evolution from snapshot aggregated template based reporting to lifecycle granular data collections will require significant changes to the regulatory reporting functions. These changes can be broken down into 3 impacted domains:
The underlying processes and organisation leading to the production of regulatory reporting needs to fundamentally reviewed in order to support the upcoming evolutions:
- Internal control framework needs to evolve to focus more on data quality while also capturing the lifecycle dimension of the reported data
- The ownership and the reporting process as such needs to break through the silos (internal and external)
- Data governance, lineage and stewardships creating visibility and ownership enabling fast investigation and turnaround
The skills and composition of reg reporting teams will need to adapt:
- Onboard or develop competencies that are more versatile than the traditional financial and accounting background:
- Data mining
- Communication and interpersonal skills
- Breaking down the organisation around periodic closing periods production peaks and shift towards a continuous monitoring of the data
In order to support their new TOM reg reporting teams will need to be supported by the appropriate tools with sufficient computing power and agility to fulfil different objectives:
- Need for STP and thus increased need for automation. e.g. Automated data quality checks and indicators
- Visualisation of data will become a key requirement for Finance departments. Data visualisation tools need to allow the Finance department to aggregate the volumes of data into reviewable cubes that can be reconciled and linked to financial aggregates
b.fine is a convinced supporter of granular data collections in general and IReF specifically. Overall we see several benefits and opportunities:
- Harmonisation of reporting requirements across countries
- Standardisation and simplification of the reporting process
- Stabilising the reporting requirements (by reducing the data gaps)
- Reduced reporting burden for banks and regulators
- Better suited for automation
- High quality statistics (removal of redundant reporting, clear concepts, detailed data sets, …)
- Cost savings
How can b.fine and b.rx help you get a competitive advantage in this transition to IReF?
From the start b.fine has anticipated the evolution from template based reporting to data collections and incorporated this in our reporting platform b.rx. That is why the data model of b.rx is built with IReF and AnaCredit concepts at its core. Having the IReF ERM model as the core of our input layer allows efficiency gains on multiple levels:
- Reconciliation by design of data collections and templates based reporting
- Reduction or absence of data transformations between the data model and the submitted datasets
- Incorporation of feedback loops to integrate a holisitic approach to reporting
- it strongly simplifies the data integration exercise since most EU banks are already organizing their data as prescribed by AnaCredit.
The DPM refit exercise in combination with IREF will allow the banks to cover statistical , prudential and resolution reporting in a standard and automated way.