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AnaCredit

By Silvio Santarossa, Partner Risk Advisory Services &

Joana Elisa Maldonado, Regulatory Compliance Assistant

Data management and reporting are at the centre of regulatory compliance in 2017: BCBS 239, EMIR and by the same token, AnaCredit – the analytical credit database project of the European Central Bank (ECB). AnaCredit will be a new dataset with granular information on individual bank loans in the euro area to support decision-making in monetary policy and macroprudential supervision. Adopted in 2014 and published in its final version in May 2016, the AnaCredit Regulation ECB/2016/13 on the collection of granular credit and credit risk data will apply as from 31 December 2017. While preparations for the first reporting in September 2018 are ongoing, we provide you with an overview of the AnaCredit requirements and point out the most important challenges of data collection, management and reporting.

A New Dataset

AnaCredit (short for analytical credit datasets) is a building block of the ECB’s strategy for data collection and statistics. It will be a new dataset with clear, timely and harmonised information on individual bank loans to legal entities in the euro area, managed by the European System of Central Banks (ESCB). The new improved statistics will support macroprudential supervision and serve decision-making in monetary policy, such as risk and collateral management. In particular, the availability of detailed and comparable data will help to control potential build-up of systemic risks in the financial sector by allowing a more micro-based accurate analysis of sectorial or regional credit risks and the credit distribution to the economy. An example for a potential use is the analysis of credit availability to SMEs

Euro Area Banks and Beyond

The AnaCredit Regulation primarily applies to credit institutions located in the euro area. In addition, foreign branches of euro area credit institutions and foreign branches which are located in the euro area fall under the new reporting obligation. Data related to credits extended by subsidiaries of credit institutions are not included if the subsidiary concerned is not a credit institution located in the euro area. Member states of the European Union which are not part of the euro area may join AnaCredit by adopting specific national laws.

Limited Scope in the First Stage

AnaCredit requires banks to report about loans to corporations and other legal persons as counterparts, loan-by-loan. This means that the reporting has a significantly different structure from the previous borrower-by-borrower reporting.

  • Reporting threshold: If the sum of credits of the client to the bank exceeds €25.000, all instruments sold to that debtor have to be reported. There is no separate limit for Non-Performing Loans (NPLs).
  • Product Scope: In the current first stage, loans to private households are excluded. For now, AnaCredit covers conventional lending products – i.e. deposits, overdrafts, credit card debts, revolving credits, credit lines, reverse repos, trade receivables, financial leases and other loans – as well as multi-debtor loans where at least one borrower is a legal person. Credit derivatives or strict off-balance-sheet items are excluded. As explained below, the product scope might be extended in the next stages.
  • Exemptions: National Central Banks (NCBs) may grant certain exemptions. For example, small banks have to report less attributes and only include loans issued from September 2018 onwards, if the derogation does not exceed 2% of the total outstanding loans. Medium-sized banks may qualify for partial exemptions of quarterly instead of monthly reporting until 2021, if the derogation does not exceed 4% of the total outstanding loans.

The AnaCredit Timeline

Overview of the AnaCredit Templates & Tables

         
 AnaCreditTemplatesTablesFrequencyNumber of Attributes 
 

Template 1

Counterparty Reference DataOnce23
e.g. number of employees, annual turnover
8895 
 Instrument DataOnce24
e.g. currency, settlement date
   
 Financial DataMonthly14
e.g. transferred amount, accrued interest
   
 Counterparty Instrument DataOnce1
counterparty role
   
 Joint Liabilities DataMonthly1
joint liability amount
   
 Template 2Accounting DataQuarterly16
e.g. encumbrance sources, prudential portfolio
   
 Protection Received DataOnce10
e.g. value & maturity date of the protection
   
 Instrument Protection Received DataMonthly2
e.g. protection allocated value
   
 Counterparty Risk DataQuarterly1
probability of default
   
 Counterparty Default DataMonthly2
e.g. default status of the counterparty
   
 IdentifiersReporting Agent Identifier 7  
 Observed Agent Identifier  
 Counterparty Identifier  
 Contract Identifier  
 Instrument Identifier  
 Protection Provider Identifier  
 Protection Identifier  
         

Three Building Blocks of Successful Compliance

Correct implementation of AnaCredit reporting is crucial, since non-compliance can trigger sanctions. Timely compliance is challenged by the following three major issues:

  1. Data collection: Required information often proves to be missing, especially in the required granularity, distributed across different departments and saved in different IT systems. Banks thus need to make sure that data are complete, consistent and exact for delivery.
  2. Data quality: Data often suffer insufficient maintenance and the quality of available data might be inadequate for the required reports. Banks have to ensure appropriate data management by maintaining and centralising data sets in order to guarantee sufficient data quality. In addition, validation rules are key to provide for high-quality data. The automated rules are used in check-error processes to look for technical errors as well as when running general-ledger reconciliation processes to verify the data quality from a financial point of view.
  3. Reporting Architecture: Finally, the reporting itself may pose a challenge to banks, since the complex high-volume processes will not allow manual intervention and need to meet the supervisory demands for granularity. It is therefore essential to build a powerful, automated, flexible and reliable end-to-end data-management system. A lean and streamlined reporting system allows banks to operate efficiently by reducing complexity and consolidating information from various sources.

Data Management and Reporting Experts

Finalyse is assisting banks in all three steps from preparatory data assessment to data management and processing and finally the reporting to the supervisors. We help our clients to assess the impact of the AnaCredit regulation, set up a compliance strategy and coordinate the implementation with other data and reporting requirements such as FINREP, COREP, IFRS 9 or BCBS 239. Do not hesitate to contact Silvio Santarossa to receive more information on our related services for timely and efficient AnaCredit compliance.