Philippine Banks Undergo Major Change in Regulatory Reporting

BSP deputy governor Chuchi Fonacier says 18 reporting templates and Excel files totalling 300-plus schedules are being reduced to a single XML file.

In February, the BSP (Bangko Sentral ng Pilipinas) issued a memorandum about updates to its regulatory reporting requirements for the banking sector.

The issuance was a continuation of a move announced in October 2021 to migrate prudential reporting to API-based mechanisms, to improve automation, strengthen the BSP’s surveillance, and help promote the overall safety and soundness of the financial industry.

New submission mechanism

Currently, BSP prudential reports (FRPv14.5 and FRP-related reports, including but not limited to CAR, LCR, NSFR, BLR etc.) are submitted through FI Portal/Email submission using Excel, and the reports are submitted in different logical groups.

According to the February issuance, the new submission mechanism under FRPv15 will require XML for FRP and FRP-related reports (as part of FRPV15), which will also be consolidated into one XML submission format. Excel based report submissions will no longer be allowed for the said reports.

“Before, banks would have to submit 18 reporting templates and Excel files, totalling 300-plus schedules in varying complexity, with voluminous data points,” BSP deputy governor Chuchi Fonacier said in an interview with Regulation Asia. “Now, with the use of the XML format, we were able to reduce the 300 schedules to a single file.”

“And there is also a corresponding reduction from 107,000 data points to around 50,000 since duplicate and calculated fields have been minimised or eliminated.”

Another benefit to banks is the BSP’s improved validation, processing and feedback mechanism, Fonacier said. “The processing of report submissions will really be improved significantly, with validation of XML files and test scenarios being reduced to less than a minute, compared to about an hour previously.”

Improved reporting workflows

“The significant shift that is taking place in BSP data collection mechanism redefines the operating model for financial institutions,” said Subbaiyan Vaithinathan, head of financial regulatory products for Asia Pacific for Adenza.

“In our experience, such initiatives present significant opportunities for financial institutions to enhance their end-to-end reporting architecture, addressing current needs as well as the desired operating model.”

Adenza, a specialist provider of regulatory reporting solutions, has handled similar changes for banks in other jurisdictions globally, where the firm has collaborated with regulators and the industry to facilitate adoption of new data reporting requirements which were seen as major industry changes.

Like the BSP, other global regulators have rolled out, or are in the process of rolling out, regulatory transformation programmes, which begin by improving the data collection process and continue with the aim of gathering more comprehensive data, eliminating redundancies, and enhancing the quality of the data collected.

Such changes also enable financial institutions to improve their data and reporting workflows while ensuring a complete audit trail of data processing and any modifications made.

Parallel run and live submissions

In the Philippines, the FRPv15 parallel run starts in April – covering the March 2023 quarter-end reports and month-end reports for second quarter. This decision was made in light of the information gathered during the close coordination with banks that started in September 2022.

During the parallel run, banks will be able to use an XML converter facility provided by the BSP to facilitate reporting, but this facility will no longer be available to universal and commercial banks once live submissions start. Thrift and rural banks will be allowed to use the facility until the end of 2024, or as may be determined by the BSP in its evaluation as the project progresses.

According to Fonacier, the idea behind the BSP’s provision of an XML converter facility was to help banks become more familiar with the new syntax, so that they can adjust and upgrade their systems accordingly.

Banks with more sophisticated IT departments will be able to more quickly adapt while other much leaner banks may need to outsource expertise to third party service providers, she said.

Live submissions of the FRPv15 will start with the June 2023 quarter-end and July 2023 month-end reports. At this point, the FRPv14.5 and covered FRP-related reports will be discontinued.

Future-proof operating models

“The existing submission portal can no longer be used to submit the reports under the API-XML transition from the end of June, so there is no fallback,” said Vaithinathan. “This change has triggered a wave of automation requests both tactically and strategically in almost all financial institutions in the Philippines.”

Tactically, banks are looking to solve the immediate XML conversion requirement, as they will be required to use their own converter facility and processes for API-based submissions.

But, since most banks are currently running regulatory reporting in-house (often in silos across different departments), they are also exploring strategic transformation initiatives to address additional pain points related to data, reconciliation and the new validation requirements.

Philippine banks are ultimately seeking to achieve a future-proof target operating model for overall regulatory reporting, to ensure they can address changes from the BSP, for example, more validation requirements or increasingly granular data which may later be required under the new API-based submission mechanism.

Fonacier said XML based reporting will allow for a more streamlined process for updating the BSP’s requirements, whether new data needs to be reported or certain data is discontinued.

In terms of other supervisory processes, the change will mean an enhanced data acquisition process as well as improved speed and quality of data visualisation and analytics.

“Statistics will be generated more quickly, enabling the regulator to access more up to date information for its various financial surveillance systems, report generation and management decision-making processes,” Fonacier said.

Regulation Asia and Adenza (previously AxiomSL) are jointly hosting an industry roundtable over lunch on 11 May 2023 to discuss the move to FRPv15 and the related impacts and opportunities. Email [email protected] for more information.

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