Central Data Hubs and the SAP Finance and Risk Data Platform.

Dear,

One of the consequences of the new regulation, emerging from the 2008 Financial Crisis (Basel III, Basel IV, BCBS 239, Dodd-Frank, IFRS 9, etc.) is the pressure for banks Information Systems, on reconciling Analytical and Operational data.

Most Core Banking Information Systems were developed in the 70s-80s, when the computing capacity was much smaller, and regulatory requirements much softer. 

Integration requires processing big data-tables and managing big memory blocks, because every transaction must read and update registers of data from other areas. As computing capabilities were more limited and reconciliation requirements less stringent, Banking Systems were built as separated silos of information with very little integration with each other.

As banking systems grew, this architecture of limited integration produced banking systems with very heterogeneous data, many complex point to point interfaces, and supported by databases whose designs are very distant from the principles of the Referential Integrity.

As mentioned before, the new Financial regulation, particularly BCBS 239 (Principles for effective risk data aggregation and risk reporting), puts the focus on data quality and data reconciliation, and this is increasing the pressure for integrating Financial Data, coming from heterogeneous sources.

https://www.bis.org/publ/bcbs239.pdf

One alternative is implementing an integrated Banking System, with a holistic management of Operational and Analytical Data (like SAP Banking). But the complete replacement of a banking information system is an expensive, challenging process. Performing it in a short-term period is only feasible for small/middle-size banks.

Consequently, many banks are confronting the issue by building a Central Data Hub which receives data from all the operational systems, homogenize the data, and finally stores and delivers it to the other systems of the banking landscape.

I’ve seen several of these initiatives in the last years, and they all present common challenges.

Projects design follow and add-hoc/on-demand approach. Data architects collect data requirements from the data consumer systems, and design the data repository according to these requirements. And then, define the interfaces for collecting data from the source systems and populating the data in the destination systems. 

To some extend, this approach implies reinventing the wheel, according to the bank’s own experience, and limited integration capabilities of the bank’s information architecture.

Additionally, regulation evolves, and new requirements force the data architects to enhance the multiple repository tables and in/out interfaces, compromising the integrity of the initial design. 

SAP has tackled the issue in a completely different way, delivering the Finance and Risk Data Platform, which combines a centralized data-model with an Integrated Financial and Risk Architecture

The Finance and Risk Data Platform has been designed to fulfill present and future Accounting, Risk and Liquidity regulatory requirements, as an alternative to the add-hoc/on-demand approach of the Central Data Hubs.

The Finance and Risk Data Platform combines:

- The accumulated knowledge in the design and development of the Integrated Financial and Risk Architecture of Bank Analyzer during the last 2 decades. The Primary Data Objects of the Bank Analyzer Source Data Layer as an standard template of the Operational Data, and the Result Types of the Results Data Layer as an standard template of Analytical Data.

Data Architects can take advantage of these standard templates as a basic reference, and enhancing them for fulfilling the bank’s specific requirements, without breaking the integrity of the data-model.

- The high-performing capabilities of SAP HANA for storing and managing very-high volumes of data, without intermediate tables and assuring the referential integrity of the database.

- The Extract, Transformation and Loading capabilities of SAP Smart Data Integration in Premise and in the Cloud.

- The Analytical Layers of SAP Bank Analyzer Risk Engines, Liquidity and Risk Management on HANA, Intraday Real-time Liquidity Management, etc.

The main advantage of this approach is the possibility of an incremental implementation, covering first the requirements of a Central Data Hub, interfacing with the current operational and analytical systems of the bank, but capable of growing and fulfilling new regulatory and functional requirements, with the implementation of the multiple analytical layers of the SAP Finance and Risk Data Platform.

Looking forward to read your opinions.

K. Regards,

Ferran.

www.capitency.com

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Ferran.frances@capitency.com