Dear,
On May the 18th, 2016 the European Central Bank published the REGULATION (EU) 2016/867 OF THE EUROPEAN CENTRAL BANK on the collection of granular credit and credit risk data (ECB/2016/13)
This regulation is commonly known as the Banks' Integrated Reporting Dictionary (BIRD).
https://www.ecb.europa.eu/ecb/legal/pdf/celex_32016r0867_en_txt.pdf
The main objective of the BIRD is defining a common framework of the data and transformation rules which banks may implement in their Information System to fulfill the reporting requirements of the regulatory authorities.
In words of the President of the ECB, Mr Mario Draghi,
“Disaggregated data are indeed necessary to identify and analyse the heterogeneity that characterises the real world. For central banks this is particularly important: to implement policy in the most effective way, we need to know how our policy actions affect all sectors of the economy. Both the challenges posed by the current economic climate for monetary and macroprudential policy, and the information required to carry out microprudential supervision by the Single Supervisory Mechanism (SSM) increase our need for granular data”.
https://www.ecb.europa.eu/press/key/date/2016/html/sp160706.en.html
Today, banks store and analyze their risk data on pools of assets with “homogeneous” characteristics, and generate provisions, measure Capital consumption, stress the contracts, and analyze their performance with the hypothesis that all the contracts of the pool present a common risk sensitivity behavior.
But, as Mr. Draghi is pointing out, this is not enough, the level of detail (granularity) that is required today is much higher than the levels of detail required before the Financial Crisis.
SAP Bank Analyzer architecture is capable of fulfilling these requirements, with two architecture pillars:
1) Contracts and Exposures are individually analyzed by the Bank Analyzer Risk Engines. Consolidation of the Results, according to the reporting dimensions, comes later.
This bottom-up approach in which all the contracts and exposures are analyzed and stressed allows a fine-grained analysis of the Risk position of the bank; supporting the determination of the Risk Weighted Assets and Capital consumed by any potential set of reporting dimensions.
On the other hand, the system stores the required Operational Information in the Source Data Layer, and the very detailed analytical information on the Results Data Layer, opening the gate for drilling-down from the aggregated to the detailed data, and facilitating the reconciliation.
2) The high-performance capabilities of the in-memory HANA Database, provides the capacity of processing high volumes of data with response times that can’t be provided by traditional (not in-memory) databases.
I still remember, when years ago, in my first Bank Analyzer project, the client complained, because a Credit Risk calculation with Bank Analyzer took for several hours, when apparently, other products promised to provide the calculation much faster.
The reason is that SAP Bank Analyzer calculates one by one, the Risk Weighted Assets of every contract and exposure, with the detailed granularity required by the Banks' Integrated Reporting Dictionary, and mentioned by the president of the ECB.
But today, we also have the high performance capacity of the Hana in-memory database, which is capable of offering the computing power necessary for running high-granularity analysis in the same time that other systems calculate aggregated, low-granularity analysis.
As we commented months ago, when we talked about the SAP Bank Analyzer value proposition for fulfilling the BCBS 239 requirements, the Banks' Integrated Reporting Dictionary is not an isolated piece of regulation. The whole regulatory framework is been transformed, and oriented towards disclosure and capital optimization.
https://www.linkedin.com/pulse/bcbs-239-principles-sap-bank-analyzer-ferran-frances
Consequently we need a holistic approach for fulfilling the regulatory requirements.
We’ll come back to this topic in a future blog.
Join the SAP Banking Group at: http://www.linkedin.com/e/gis/92860
Visit my SAP Banking Blog at: http://sapbank.blogspot.com/
Let's connect on Twitter: @FerranFrancesGi
Looking forward to read your opinions.
Kind Regards,
Ferran Frances.
On May the 18th, 2016 the European Central Bank published the REGULATION (EU) 2016/867 OF THE EUROPEAN CENTRAL BANK on the collection of granular credit and credit risk data (ECB/2016/13)
This regulation is commonly known as the Banks' Integrated Reporting Dictionary (BIRD).
https://www.ecb.europa.eu/ecb/legal/pdf/celex_32016r0867_en_txt.pdf
The main objective of the BIRD is defining a common framework of the data and transformation rules which banks may implement in their Information System to fulfill the reporting requirements of the regulatory authorities.
In words of the President of the ECB, Mr Mario Draghi,
“Disaggregated data are indeed necessary to identify and analyse the heterogeneity that characterises the real world. For central banks this is particularly important: to implement policy in the most effective way, we need to know how our policy actions affect all sectors of the economy. Both the challenges posed by the current economic climate for monetary and macroprudential policy, and the information required to carry out microprudential supervision by the Single Supervisory Mechanism (SSM) increase our need for granular data”.
https://www.ecb.europa.eu/press/key/date/2016/html/sp160706.en.html
Today, banks store and analyze their risk data on pools of assets with “homogeneous” characteristics, and generate provisions, measure Capital consumption, stress the contracts, and analyze their performance with the hypothesis that all the contracts of the pool present a common risk sensitivity behavior.
But, as Mr. Draghi is pointing out, this is not enough, the level of detail (granularity) that is required today is much higher than the levels of detail required before the Financial Crisis.
SAP Bank Analyzer architecture is capable of fulfilling these requirements, with two architecture pillars:
1) Contracts and Exposures are individually analyzed by the Bank Analyzer Risk Engines. Consolidation of the Results, according to the reporting dimensions, comes later.
This bottom-up approach in which all the contracts and exposures are analyzed and stressed allows a fine-grained analysis of the Risk position of the bank; supporting the determination of the Risk Weighted Assets and Capital consumed by any potential set of reporting dimensions.
On the other hand, the system stores the required Operational Information in the Source Data Layer, and the very detailed analytical information on the Results Data Layer, opening the gate for drilling-down from the aggregated to the detailed data, and facilitating the reconciliation.
2) The high-performance capabilities of the in-memory HANA Database, provides the capacity of processing high volumes of data with response times that can’t be provided by traditional (not in-memory) databases.
I still remember, when years ago, in my first Bank Analyzer project, the client complained, because a Credit Risk calculation with Bank Analyzer took for several hours, when apparently, other products promised to provide the calculation much faster.
The reason is that SAP Bank Analyzer calculates one by one, the Risk Weighted Assets of every contract and exposure, with the detailed granularity required by the Banks' Integrated Reporting Dictionary, and mentioned by the president of the ECB.
But today, we also have the high performance capacity of the Hana in-memory database, which is capable of offering the computing power necessary for running high-granularity analysis in the same time that other systems calculate aggregated, low-granularity analysis.
As we commented months ago, when we talked about the SAP Bank Analyzer value proposition for fulfilling the BCBS 239 requirements, the Banks' Integrated Reporting Dictionary is not an isolated piece of regulation. The whole regulatory framework is been transformed, and oriented towards disclosure and capital optimization.
https://www.linkedin.com/pulse/bcbs-239-principles-sap-bank-analyzer-ferran-frances
Consequently we need a holistic approach for fulfilling the regulatory requirements.
We’ll come back to this topic in a future blog.
Join the SAP Banking Group at: http://www.linkedin.com/e/gis/92860
Visit my SAP Banking Blog at: http://sapbank.blogspot.com/
Let's connect on Twitter: @FerranFrancesGi
Looking forward to read your opinions.
Kind Regards,
Ferran Frances.
