In light of these challenges it is unsurprising that the PRA is looking to simplify and improve the regulatory reporting framework through the Banking Data Review (BDR).
With James Benford, BoE Executive Director for Data and Analytics Transformation and Chief Data Officer, providing further details on the BDR in a speech on 3 October 2024, now is a good time to look ahead to what the BDR might mean for firms and what they can be doing to prepare for it.
Key principles and phases of the BDR
The BDR will be guided by several key principles designed to ensure the effectiveness and efficiency of data collections. These are:
clarity and purpose-driven collections
consolidation of collections
proportionality supported by cost-benefit analysis.
The success of the BDR is an important component of the PRA’s approach to its secondary objective for growth and international competitiveness, due to the high costs of reporting obligations. This is reinforced in Benford’s speech where he notes an industry survey which reports that costs for the banking sector from regulatory reporting range from £1.5 billion to £2.0 billion, with larger firms incurring higher costs due to more complex reporting requirements.
The BDR will proceed in three phases:
First phase - by summer 2025: The PRA will consult on a wave of whole form deletions and proposals to close gaps and regularise reporting on counterparty credit risk.
Second phase - 2026: It will review the approach to credit risk and identify collections that can be slimmed down and consolidated.
Third phase: The final phase will focus on the remaining areas of reporting, ensuring a comprehensive review of all data collections.
Making the most of a period of change
Further detail will be forthcoming from the PRA on its proposed changes under the BDR, but the regulator’s intention to make significant changes to the UK’s regulatory reporting landscape is clear. It is likely that the PRA will delete returns it does not value, but is equally likely to introduce new returns where they see gaps or emerging risks (reflected in the fact the PRA is prioritising counterparty credit risk, an ongoing area of supervisory focus).
This means firms have an unprecedented opportunity to work with the PRA to reshape the regulatory reporting framework to ensure it better supports decision-making and aligns with firms’ own data needs. Achieving this would result in more accurate and reliable data, improved risk management and increased operational efficiency.
Firms should take advantage of the change that the BDR represents. Key to this will be optimising processes to make them more efficient and strengthening the governance, systems, data, processes and controls across the first, second and third lines of defence.
Are there any particular areas firms should consider today?
Whilst the first phases of the BDR are planned for summer 2025, there are a number of areas firms can consider today. These include but are not limited to:
Change - implementation programmes: Many firms are already undertaking major reporting changes (for example due to Basel 3.1). These programmes will of course continue. However, firms should also consider their five-year horizon. This should include assessing how future regulatory changes might impact long-term reporting strategies as well as ensuring that implementation programmes are flexible enough to adapt to these changes.
Ongoing remediation programmes and future areas of focus: For ongoing remediation programmes it will be important to assess any impact due to the BDR on these. Firms should also assess where additional reporting requirements might emerge. For example, the PRA is clearly prioritising counterparty credit risk in the first phase of the BDR and is likely to focus on other emerging supervisory priorities in later stages. As such firms that proactively assess capabilities and gaps in these emerging areas will be better placed to meet future expectations.
Validation processes: While most validation frameworks will continue as planned, firms should consider revisiting these to confirm they can accommodate regulatory changes in a structured manner. This includes reassessing quality assurance and validation mechanisms to maintain their robustness and effectiveness in light of new regulatory requirements.
Data governance: As part of the BDR, and other ongoing reporting obligation changes, strengthening data governance frameworks is an essential step to ensure data quality, accuracy, and consistency across all reporting areas. Firms should continue to focus on improving data controls across the first, second, and third lines of defence to ensure comprehensive oversight and risk management.
Technology investment: Technology is transforming regulatory reporting, with artificial intelligence playing an increasingly important role in the reporting ecosystem. Leveraging advanced technologies can streamline reporting processes, improve overall efficiency and adaptability. The PRA has also invested in new technologies and firms should understand both the impact of these changes and expectations to update their own systems.
Looking ahead strategically
Firms need to consider the broad range of factors which are impacting on the evolving regulatory reporting landscape.
These include ongoing initiatives across regulatory reporting governance, data, systems, processes and controls. Industry and the regulators are also responding to the transformational potential of technology and an ever changing risk environment. Added to these dynamics is the BDR, and the PRA's commitment to overhaul its regulatory reporting framework.
As with other areas of regulatory change, those firms that think through the strategic and operational implications of the BDR, and wider changes, at an early stage will be best placed to navigate this period of change. Those firms which are prepared to engage fully in the BDR process also have the potential to support the reshaping of the prudential regulatory reporting framework in the UK.
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