When in March 2018 the Monetary Authority of Singapore (MAS) announced revised standards on data collection requirements for MAS 610/1003 regulatory returns, the number of data points financial institutions were required to report jumped from about 4,000 to more than 300,000 across 67 reports. MAS set a tight 24-month implementation window. Starting on 1 April 2020, financial institutions must submit returns for both the current and revised MAS 610 during a six-month parallel reporting phase ending 30 September 2020.
Recognising the depth of the challenge posed by the new standards, AxiomSL — a leading provider of regulatory reporting, data and risk management solutions — decided that this industry challenge merited an innovative approach. So, AxiomSL convened a diverse group that worked together as a consortium to simplify and streamline MAS 610 compliance reporting.
The result of this unique collaborative initiative was an Open Taxonomy for the MAS 610 that the consortium released to the marketplace in June 2018.
The Open Taxonomy facilitates industry participants taking a common approach to fulfilling the MAS data ask. It distils the more than 300,000 required data points into 1,000 reusable business concepts, grouped into 67 reporting dimensions and 65 reportable amount-types.
The creation of common data relationships that describe and validate data points, establish relationships between them, and enable automatic generation and maintenance of derived data points – provides a level of consistency that would not have been possible without a collaborative approach, noted one of the judges involved in awarding AxiomSL the prize for Outstanding Collaborative Initiative in the inaugural Regulation Asia Awards for Excellence last year.
The wisdom of the crowd
“We didn’t have a playbook to fall back on and we had to make sure the ingredients were correct,” said Abraham Teo, Head of Products, APAC for AxiomSL. “At the start, that’s the role we played — getting everyone together,” he continued. BR-AG, a niche specialist firm brought its expertise in creating regulatory data taxonomies to the initiative. And PwC joined to partner in aproject management office role. Together, AxiomSL, BR-AG and PwC were able to explain the taxonomy proposal to financial institutions, state why it was useful to join the consortium and what additional benefits would result from the initiative’s success.
“We were looking for a mix,” Teo explained, adding, “We wanted to draw upon the experience and knowledge of a variety of foreign, local, investment, private, and retail banks.” Ultimately two D-SIBs and seven international banks including four G-SIBs joined the consortium.
At the time, the Open Taxonomy project was among the industry initiatives that qualified for funding support from MAS through the Artificial Intelligence and Data Analytics (AIDA) Grant, announced in November 2017 to promote the adoption and integration of AI and data analytics in financial institutions. Still, the project was in large part funded by the banks themselves, a model which created a strong working bond and accountability – with the participating banks dedicating effort and time to review and check the proposals and quickly return comments.
“The wisdom of the crowd applied here,” remarked Teo, “providing ideas and resources that enabled the project’s success.”
Keys to success: simplicity, openness, access
“At the outset, AxiomSL and its partners articulated an umbrella concept — the importance of the term ‘open’.” The Open Taxonomy would be available to all reporting financial institutions and their technology partners. Not only would it achieve the primary goal of enabling compliance, it also would encourage and catalyse broad-based adoption and innovation in related technology and services, thus amplifying industry-wide benefits and cost reductions. The group articulated four guiding objectives:
• Data quality improvement
• Change management
• Operating costs reduction
“We quickly realised that the value of the consortium was in bringing together the banks on an important, non-competitive issue,” Teo noted. “They had to be willing to come on board and change the way they did certain things. They experienced a mindset shift: if we cooperate with each other, we’re going to get something good out of it,” he added. By creating an open taxonomy objective, the banks became confident that they could talk freely about how they were facing the MAS 610/1003 compliance challenge. “Honestly, it was not the easiest thing in the world, but we managed get everyone to appreciate the shared problem.”
The initiative was guided by a keep-it-simple motto, which called for open access and clear governance. The group began by defining the dimensions, members and measures of the proposed taxonomy, with two key deliverables:
• The underlying data relationships
• MAS 610 reporting requirements represented in an an industry-developed taxonomy that would be open and available to all financial institutions upon completion
The consortium considered both the MAS Notice 610, which covers financial and statistical reporting for banks in Singapore excepting merchant banks, and the MAS Notice 1003, which covers merchant banks because they are broadly the same and would share most taxonomy definitions.
Three months to an on-time release
The Consortium’s Open Taxonomy project deliverables included:
• Analysing the new MAS forms
• Distilling business concepts
• Analysing linkages and descriptions of each business concept and reportable amount
• Organising them in a taxonomy data-point model
• Performing both functional and technical testing
• Ensuring the taxonomy solution was fit for purpose
The project ran on an iterative basis. BR-AG created a draft taxonomy that PwC and AxiomSL reviewed and handed off to the nine participating banks for comment. This cycle repeated three times to ensure completeness and consistency. The project incorporated training in data modelling and taxonomy concepts for consortium participants, which ultimately served to raise the proficiency in the industry. By the end, more than 400 comments from the banks were logged, coordinated and consolidated using BR-AG’s data modelling tool. After many iterations, workshops, meetings and 20 revisions, the participants found common ground.
In June 2018, only three months later, the consortium successfully completed the Open Taxonomy project on time.
Pleasant surprises and the benefits of openness
A big concern of the banks at the start of the project was how to deal with differing interpretations such as which data attributes are generic vs. those that might be specific to the bank. “In the end, what surprised everyone was that the consortium saw convergence in opinions, rather than divergence,” remarked Teo.
The Open Taxonomy offers financial institutions the opportunity to reduce the labour needed to separately conduct repetitive, industry-wide analysis of data points. A key benefit of industry collaboration on a project like this is that it reduces the analysis step from an average of six person-months to less than one person-month, depending on the financial institution’s size and complexity.
When used by many firms, the resulting data definitions and relationships establish best practices and reduce the cost and ambiguity associated with each firm’s interpretations. Further, when inevitable regulator-driven changes occur, they can be described in terms of the taxonomy. This accelerates comment cycles and focuses discussion on the impact of changes. A standard taxonomy also dramatically increases the potential for automation in testing and deployment and the timeliness and accuracy of future implementations.
“The banks are using the taxonomy confidently. It’s bringing economies of scale and creating value that is greater than the sum of its parts,” stated Teo.
The Open Taxonomy is available to all reporting firms and their respective technology partners. This encourages broad-based adoption and innovation in related technology (e.g. testing and analysis) and services (e.g. audit). It creates onward efficiencies for financial institutions, reducing compliance-related costs and improving the quality and consistency of reported data.
AxiomSL’s MAS 610 solutions and expertise
In addition to delivering MAS 610 solutions through on-premise deployment, AxiomSL also offers its MAS 610 solution through Software-as-a-Service (SaaS) and Platform as a Service (PaaS) delivery options, which utilise a cloud-based approach to alleviate the burden of procuring and operating the complex, hardware and software infrastructure required for reporting. AxiomSL has trained over 200 professionals on the Open Taxonomy since the project’s completion in June 2018 and more than 30 financial institutions have licensed it for use in their revised MAS 610 implementations.
By managing and maintaining the infrastructure required for compliance, AxiomSL expects the solution to enable banks to benefit from enhanced economies of scale, information consistency and operational transparency. “Now on version three, we are still building the taxonomy and reviewing it every quarter,” Teo noted.
AxiomSL is also staying in constant dialogue with market participants, obtaining feedback through its MAS 610 Breakfast series and other outreach activities. “The banks are looking at real-world experience and real-world data and are able to share: ‘this works’, ‘this doesn’t work’, etc. We update the taxonomy as necessary, Teo said.”
Regulatory disruption in other markets
While creating an 610 Open Taxonomy for MAS 610 represents the consortium’s successful effort to significantly enhance a specific area of regulatory reporting in Singapore, AxiomSL believes this model of collaborative work on pre-competitive issues such as common data relationships can be more widely applied in other markets where regulations have been substantively updated, as demonstrated for example, by AxiomSL’s current work on APRA’s EFS taxonomy.
As an industry leader with broad regulatory subject-matter expertise and a global network of financial-sector clients, AxiomSL recognises that regulatory bodies – notably in Australia and Europe – are increasingly and actively acknowledging that clear taxonomies enable better reporting results. “If you can identify a common pain point, you can encourage the industry to get together. If everyone goes their separate ways, you end up with things being done differently,” said Teo. This divergence creates inefficiencies, adds costs to banks’ regulatory programs and inhibits the regulators getting the clean, consistent reporting they need and expect.
“The Open Taxonomy initiative was a great experience. If opportunities present themselves, we are keen to engage in this kind of industry collaboration again in other markets,” Teo concluded.
This article was produced in conjunction with Regulation Asia.