Towards better financial data reporting

What is this action about?

Many institutions in the financial sector, including private companies like banks or public administrations and National and European Regulatory/Supervisory Agencies, need to report or act on financial data as requested by EU law in force. The lack of a common financial language and the lack of interoperability between public risk data infrastructures increase on one side the costs related to legal reporting requirements, while making it difficult on the other side to aggregate risk data and to ensure a complete market monitoring.

Under this ISA² action, the European Commission aims to investigate the options for a framework of interoperable standards that will enable:

• Efficient reporting of financial data
• Efficient monitoring of the financial system, including banks, insurance companies and financial markets
• Risk assessment by the supervision authorities
• Contribution to the stability of the European Union's financial system

What are the objectives?

The high-level objectives of this project are to propose a framework of interoperable financial data reporting standards and enhance the interoperability of relevant data infrastructures. This will enable a more (cost-)efficient reporting of financial data and monitoring of the financial system (banks, insurance companies, and financial markets) as well as to enhance the risk assessment capabilities of the EU and the national supervision authorities, and thus contributing to the safeguarding of the stability of the EU's financial system.

What are the benefits?

For financial institutions

• Lower data reporting compliance costs
• Incentive to abolish legacy data and IT systems and migrate to a more robust common data standard
• Increased transparency of internal risk reporting
• Reduced risk related to manual data handling

For National Regulatory Agencies

• Improved capacity to gather and monitor data, and share data analysis

For National Supervisory Agencies, the European Central Bank and other EU financial bodies

• Improved capacity to gather and monitor data, and share data analysis
• Improved monitoring of the allocation and evolution of risk in the EU/global financial system      

What has been already achieved?

• an overview of the reporting frameworks under DG FISMA's responsibility
• factsheets with detailed information for more than 50 reporting frameworks
• a shortlist of 22 “structured data” reporting frameworks in scope for further detailed analysis
• a methodology for the detailed analysis of the reporting requirements per structured reporting framework
• a detailed analysis of reporting obligations and all required data elements for the 22 reporting frameworks

What are the next steps?

Since inconsistent definitions seem to be a main source of the burden and cost for Industry, the FDS project is focussing on a common financial language, ontology, identifiers and standards. Concrete action is planned in 2020 in the following areas:

• Machine Learning (ML) Proof-of-Concept: following the encouraging results of the first ML Proof-of-Concept, the approach will be extended in terms of coverage and functionality - applying natural language processing and machine learning techniques combined with human expert input to analyse legal texts and identify relevant concepts and their definitions.
• Update of existing Data Reporting Requirements repository: the relevant legal acts are regularly updated with new legislation and old legislation is repealed, modified or integrated. Given the changes that took place in the legislation since the cut-off date of the analysis conducted to date, the results obtained under the previous analysis are partially outdated. The existing deliverables, the repository of reporting obligations and the data model repository, will therefore be updated.
• Machine Readable and Executable legislation Proof-of-Concept.
• Legislative Drafting Tool Proof-of-Concept: to demonstrate how existing common definitions could be re-used during the drafting process of new legislation.
• Alignment with international standards (ISO, CEN)