Regulatory Reporting: Implementing the proposed MAS Notice 610. Navigating the regulatory reporting and data challenge

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1 Regulatory Reporting: Implementing the proposed MAS Notice 610 Navigating the regulatory reporting and data challenge

2 Contents 03 Introduction 04 MAS Notice 610 timeline and implementation 05 Addressing your MAS Notice 610 needs 06 Key challenges and opportunities 07 How EY can help 08 Our thought leaders 2 Regulatory reporting: implementing the proposed MAS Notice 610

3 Introduction Since the 2008 financial crisis, the volume and complexity of regulatory reporting has continued to increase both in and globally. The Monetary Authority of ( MAS ) published a second consultation paper and response to feedback on proposed changes to required regulatory reporting requirements in MAS Notice 610 in February 2017 which is in line with global initiatives such as Basel Committee on Banking Supervision ( BCBS ) 239 (Risk Data Aggregation and Reporting) and the Dodd-Frank Act in United States. These changes will continue to put pressure on the data, infrastructure, processes and people supporting regulatory reporting. Key proposed MAS Notice 610 changes include: submission of quarterly, semi-annual and annual reports within 30 days; submission of consolidated reports within 45 days; 75 times more data elements required (from approximately 4,000 to approx. 300,000); more granular data classification; and removal of the DBU-ACU divide. This is the biggest regulatory reporting transformation that banks in have seen in recent times and it will require them to establish strong change management functions as well as embrace new technologies. Financial institutions in a cost constrained environment have an opportunity to examine how they can deliver increasingly complex requirements while reducing the cost of delivery through automation and effective programme governance methodologies. For financial institutions, this regulatory reporting exercise can serve as an opportunity to achieve operational efficiency and enhanced data quality through intelligent deployment of technology. Regulatory reporting: implementing the proposed MAS Notice 610 3

4 MAS Notice 610 timeline and implementation The evolution of MAS Notice 610 In December the MAS introduced the first consultation paper on proposed MAS Notice 610 The MAS is expected to finalise MAS Notice 610 by Q or Q By mid-2020, banks are expected to have completed parallel reporting and associated testing Finalisation of current MAS 610 regulation In February MAS introduced a second set of changes applicable to MAS Notice 610 and a second consultation paper Banks are expected to have implemented all MAS Notice 610 requirements and commence parallel reporting ( go-live ) Implementation timeline and progress updates Enhanced regulatory reporting requirements Governance and programme management The MAS has proposed that the MAS Notice 610 changes take effect 30 months from the formal issuance (24 months implementation period and six months testing period) The MAS has proposed that banks and merchant banks update on their progress every six months The amendments to MAS Notice 610 have been developed to promote market transparency for banks and ensure the MAS has sufficient information to identify potential systemic or microeconomic issues The additional granularity of data elements proposed for disclosure (more than 75 times more data required) is a significant undertaking for any financial institution Current MAS annexes 45 pages More than 450 data fields More than 4000 data cells Successful implementation will require operationalisation of a strong change management and governance structure, securing an appropriate budget and stakeholder buy-in from across the organisation The significant amount of data sourcing, process changes and system enhancements will require each financial organisation to establish a 30 month implementation plan. Sourcing of data and automated solutions will be key to successful implementation Proposed MAS Notice annexes 260 pages Approximately 700 data fields Approximately 300,000 data cells 4 Regulatory reporting: implementing the proposed MAS Notice 610

5 Addressing your MAS 610 needs Organisations should seek to automate the regulatory reporting process and examine the use of vendor software and managed services to reduce the cost of ownership, lower the cost of change, and increase data quality and consistency. Figure 1: Strategic focus areas for meeting regulatory reporting challenges Governance and oversight Implementing or improving governance structures (i.e. assigning appropriate accountability for report preparation and data collection) to enhance monitoring and oversight for regulatory reporting Data quality and controls Addressing data quality and data integrity issues (i.e. ability to obtain transactional product and customer data (reference data granularity)) +/- Strategic regulatory reporting focus areas Data sourcing and analysis Addressing the strength of data sourcing processes currently in place in order to move towards a better defined and sustainable reporting process $ Process and people Developing the appropriate size and orqanisational model to support the efficient and seamless delivery of regulatory reporting Supporting technology Reducing reliance on manual processes when preparing reports by leveraging data warehouses or vendor reporting tools Cost of delivery Assessing and reengineering current processes to identify methods of reducing costs and driving efficiencies Adopting a strategic approach to regulatory reporting can help organisations design and implement simple and scalable processes that can ultimately support better decision-making via higher quality data and analytics and lead to a reduction in both operational risks and operating costs. Figure 2: An example of a simplified workflow required for reporting Overall governance, controls and monitoring Regulatory data sourcing and transformation Source systems (golden source) Risk systems Data warehouse GL reconciliation Report production Analysis Regulatory interpretation and compliance Review generation solution Review based on thresholds and variance analysis Issues and change management Data governance Validations and compliance checks Executive review and submission Final review and sign-off Regulatory reporting: implementing the proposed MAS Notice 610 5

6 Key challenges and opportunities The proposed MAS Notice 610 is the largest regulatory reporting undertaking for banks in in recent history. The changes present an opportunity for banks to deliver MAS Notice 610 compliance on time and on budget through automation and system enhancements. The investment required will need to be cognizant of wider technology strategies in order to maximise synergies and implement change in a cost-effective manner. Below are the major categories where banks may experience implementation challenges and at the same time an opportunity to optimise. Data quality and data availability Technology and architecture Process Governance, controls and policies Challenge The proposed MAS Notice 610 changes will require banks to source additional data either internally through system enhancements or externally through vendors. The large amount of data may also pose data quality challenges. For example, financial data (e.g. financial commitments details, etc.), non-financial data (litigation, count of operational incidents by business unit, etc.), increased granularity of data (e.g. contingent liabilities breakdown, etc.) Technology will be a central focal point for providing the solution to the vast reporting requirements under the proposed MAS Notice 610. Organisations will need to consider design and costs of internal system development as well as last-mile reporting vendors. For example: In addition to the full in house hosted solutions, established reporting vendors as well as new entrants are building POCs to deal with the new reports The DBU-ACU divide will create a technological challenge where banks will have to maintain dual reporting until the end of the parallel run phase The large volume of additional data fields required, as well as the volume of reporting, will challenge banks to move away from tactical solutions. Current state processes will need to be re-designed, with automation providing a scalable and cost-effective solution. For example, the ultimate risk reporting requirement will challenge manual processes given the need for large volumes of granular data from multiple business units and functions within the organisation Successful implementation will require senior management oversight, cross-functional stakeholder buy-in and the establishment of effective governance to manage and deliver the programme of work Opportunity Assess and enhance data governance across the organisation, including the need for a unified data model and technology-based solutions for sourcing new or more granular data Organisations can automate their reporting process through investments in technology, unified data management, managed services etc. Furthermore, there is a real opportunity to revisit technology solutions that can satisfy multiple regulatory requirements (e.g. MAS Notice 610, capital reporting and Basel III, management reporting, BCBS 239 etc.) Create an integrated and automated regulatory reporting function that will reduce resource costs whilst providing scalability for future changes Effective governance and change management will ensure solutions are aligned to the organisation s overall strategy and other in-flight initiatives whilst also allowing data controls and policies to be enhanced People and organisation Implementation of the proposed MAS Notice 610 will require organisations to secure sufficient budget and resources in order to deliver a solution. Management will need to also consider the people support structure needed to support the ongoing reporting process as well as effective change management in future periods. For example, the parallel run phase will put pressure on both resources and reporting capabilities The proposed changes are an opportunity to educate senior management and secure funding whilst also allowing organisations to optimise their people model by maximising automation and technology 6 Regulatory reporting: implementing the proposed MAS Notice 610

7 How EY can help EY has extensive experience helping organisations navigate through regulatory reporting requirements and associated risk management transformations. We have a strong track record in supporting local and foreign banks in and around the world with conducting assessments of the current state to identify regulatory reporting improvement opportunities as well as programme governance and implementation support (e.g. Implementation roadmap design, controls, automation/technology, data quality, target operating model design and benchmarking). We offer a range of services and can tailor a programme suited to your needs, requirements and priorities. Contact us to discuss how we can provide insight and help you with your MAS Notice 610 journey We can help your organisation improve its capability and realise tangible benefits that include: Simplified integration of new reporting requirements Detailed analysis of requirements coupled with efficient and effective design and implementation support Reduced costs and increased automation A reduction in the number of FTEs required to source, clean and prepare data and reports Scalable and standardised processes Processes that are well controlled and capable of catering for changes in regulatory reporting requirements without the need for subsequent large change programmes Improved accuracy and completeness Improved confidence in data from the reduction of manual data sourcing and preparation activities and greater use of data quality analytics as a detective control Reduced key person dependency Better knowledge transfer and sharing to reduce key person risk and build stronger governance EY offerings Design and Implementation support Independent validation and assurance Remediation and regulatory action Remediation support and programme management Training and workshops Independent review Regulatory requirement interpretations Current state mapping and gap analysis Efficiency and maturity analysis Target operating model (TOM) design Process automation (including automated return completion) Sustainable reporting implementation Training and workshops Software vendor selection Data model, data dictionary, data quality rules and data management strategy and implementation support Managed services Tactical/strategic implementation support of reporting platforms Independent review and assurance Internal audit support EY offerings to accelerate your journey to realising benefits Regulatory reporting: implementing the proposed MAS Notice 610 7

8 Our thought leaders EY has leading financial services risk management teams and the global EY network of regulatory risk professionals are ready to help your organisation Gary Mellody Partner Ernst & Young Advisory Pte Ltd Tel: David Scott Partner Ernst & Young Advisory Pte Ltd Tel: Goran Stojanoski Director Ernst & Young Advisory Pte Ltd Tel: EY Assurance Tax Transactions Advisory About EY EY is a global leader in assurance, tax, transaction and advisory services. The insights and quality services we deliver help build trust and confidence in the capital markets and in economies the world over. We develop outstanding leaders who team to deliver on our promises to all of our stakeholders. In so doing, we play a critical role in building a better working world for our people, for our clients and for our communities. EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients. For more information about our organization, please visit ey.com EYGM Limited. All Rights Reserved. EYG no GBL ED None This material has been prepared for general informational purposes only and is not intended to be relied upon as accounting, tax, or other professional advice. Please refer to your advisors for specific advice. ey.com Chng Gim Sing Executive Director Ernst & Young LLP Tel: gim-sing.chng@sg.ey.com Todor Petrov Manager Ernst & Young Advisory Pte Ltd Tel: todor.petrov@sg.ey.com