The (slightly longer…) roadmap to IReF implementation

Veröffentliche eine Notiz:

Last December ECB and EBA jointly published the output of a broad industry workshop “on the way forward”, based also on the results of the second cycle of the IReF Cost and Benefits Assessment (CBA), executed in September 2022. As expected, the CBA outcome showed overwhelming support across Banking industry segments, including – which was a little surprising to read – in the small depository institutions category. The fact that even domestic-business-only institutions, with no material corporate banking exposures, were vouching for IReF attests to the very real value proposition of the concept as envisaged by European central bankers and regulators.

However, industry observers could be forgiven for having their enthusiasm tempered by the fact that the important next step of IReF delivery (namely consultation on the precise IReF regulatory framework itself) was moved one year later than planned. If both the regulators and the regulated are fully convinced about the necessity of a particular initiative, why is the next step of said initiative moved further in the future one might ask? As it turns out, the answer most probably revolves around stability and consensus priorities – values that are at the core of the European Banking Union concept.

To gain some perspective, it would thus be expedient to take stock of what has been achieved so far and where we currently are along the IReF roadmap.

Already in 2013, the CRD-IV package envisaged the creation of an IRS as a tool used by regulators to detect the risk of banks becoming insolvent. The EBA was mandated with a feasibility study to that effect, due end of June 2020.

EBA delivered a positive recommendation and, along with the ESCB, took part in mobilizing resources towards delivering at least part of the IRS – in the guise of IReF. Whereas IRS provided for all three of statistical/prudential/resolution data sets, IReF was defined as statistical-only. Coordination of effort was entrusted in 2021 to an Informal Coordination Group (ICG), to be succeeded by an Informal Joint Reporting Committee (iJRC) on the run-up to the creation of a proper IReF regulatory corpus (complete with RTS/ITS). The later was expected to institute a formal JRC, seeing IReF to operational roll-out.

In the meantime, EBA was already in the process of stabilizing the DPM methodology, which it had been using as guidance to submitters for the best part of a decade. This experience led to the realization that there existed the possibility of creating a collaborative “least common denominator” data model that could serve at least as industry guidance. Industry response to this possibility was positive, leading to the creation of BIRD.

At the moment, BIRD is meant to be a “best practice” data model and methodology serving as up-stream data preparation layer standing before the IReF Collection Layer. However, in reality it has all the hallmarks of a typical “open source” project as known from the ICT world. Although it is not mandatory, it may logically become an industry standard. It can assume at least part of the Collection Layer functionality, even though precise specification of the later has to await publication of the official IReF regulatory corpus. It is perhaps telling that, as per official ECB communication[1]:

The BIRD can cover any statistical, prudential, and resolution reporting requirements, including:

  • The IReF collection layer (statistical reporting requirements):
    • the ECB’s collection of granular credit and credit risk data (AnaCredit).
    • the ECB’s Securities Holdings Statistics (SHS).
    • the ECB’s Monetary Financial Institutions’ Balance Sheet Items (BSI) Statistics.
    • the ECB’s Monetary Financial Institutions’ Interest Rate (MIR) Statistics.
    • other statistical information required for the compilation of the balance of payments and national accounts.

  • The additional requirements under the Single Supervisory Mechanism (SSM) and the Single Resolution Mechanism (SRM).
  • The EBA’s Implementing Technical Standards (ITS), including Common Reporting (COREP) and Financial Reporting (FINREP).”

So, it is a safe assumption that the most prominent actors and stakeholders of the EU Banking and Financial Markets industry, from the large financial institutions to reporting services providers to the ESCB, are all “going in position” for the IReF implementation by practicing based on BIRD.

Which brings us back to the question of the IReF timeline.

As per joint ECB/EBA communication, 2023 is to be the year of the drafting of the IReF regulatory corpus, expected to be ready to submit to public consultation by early 2024. The intention is to have a regulatory text ready to submit for approval by early 2025, which will leave the original “beginning of 2027” deadline for first IReF operational use intact.

Given that a further CBA is planned for 2023 as well, it would be tempting for some industry participants to assume that there will be ample time to prepare, eventually longer than 2027. However, ESCB has been working hard to achieve precisely what is needed: a fact-based consensus, and a de-facto industry standard transparent to all. We believe that, even though the IReF timeline has appeared to be too-optimistic at times, the current 2027 date for “go-live” implementation is quite achievable.

[1] https://www.ecb.europa.eu/stats/ecb_statistics/co-operation_and_standards/reporting/html/bird_dedicated.en.html


Author

Marinela Bilic-Nosic

Executive Partner
Banking and Financial Market

Marinela.bilic-nosic@ibm.com

Johannes Giannakouros

Consulting
Promontory Financial Group

Johannes.Giannakouros@ch.ibm.com

Umesh Nimbalkar

Associate Partner
Banking and Financial Market

Umesh.Nimbalkar1@ibm.com

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