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PRA plans for FDSF steady state give banks an

opportunity to plan strategically


April 8, 2015 – By Nicholas Hamilton, Research Analyst, Policy and Product
Strategy
The Firm Data Submission Framework (FDSF) is the lifeblood of the Bank of
England’s (BOE) stress testing work, supplying it with the data it needs to analyze the
resilience of the UK’s banking system. However, banks’ efforts

to submit the necessary data to


the Prudential Regulation Authority (PRA), which is responsible for FDSF, have often
been complicated by the evolving nature of the requirements. The good news is that this
is now going to change, as the PRA has announced its intention to establish a steady
state for FDSF.

Since it was first introduced, the scope of FDSF has been continually expanded to
encompass more risk types – including the addition of counterparty risk this year. As
banks attempt to keep pace with the changes, the task facing them has been made
more challenging by a number of inconsistencies in the FDSF data definitions and
templates. Banks have also often been given little time to analyze and implement
updated versions of the templates before using them to submit their data to the PRA.

The regulator has acknowledged these issues. It knows that if it wants banks to submit
good quality data in a timely manner, it must give them the stability and time they need
to prepare. To this end, it plans to introduce two important changes that will create an
FDSF steady state:

 Stable core data model: The PRA will delineate the portions of the FDSF templates that will
not be changed in the foreseeable future. This is designed to give banks the confidence they
need to invest time and money implementing more robust processes for populating the
relevant fields.
 Annual template releases: The PRA will also begin releasing updated versions of the FDSF
templates only once a year, and will give banks more time to absorb the changes before they
must report. This will ensure they fully understand the updates and how the PRA’s data
definitions map into their own.
The PRA has begun consulting the banks that are currently subject to FDSF and
expects to finalize its changes by the end of the year.

The proposed changes are excellent news for the reporting institutions (as well as the
wider group of banks that will be required to comply with FDSF in the future). The
introduction of FDSF was a significant event for banks, particularly as it was the first
time many risk functions were required to report externally. However, some banks
decided not to implement the sorts of strategic solutions they would have liked, because
of concerns about changes to the requirements. The greater certainty the PRA now
intends to provide regarding FDSF means banks can proceed with more robust and
effective compliance projects.

As they look for ways to optimize their FDSF reporting programs, banks should consider
the benefits of using a single platform to aggregate and submit all of the necessary data
to the PRA. FDSF requires data from multiple lines of business. By consolidating all of
this on a single platform, banks can be sure the data they report is consistent and
accurate, and they can eliminate costly duplicate processes.

Banks should also examine whether their current reporting tool gives them the ability to
reconcile their FDSF reports with other regulatory submissions, such as Common
Reporting (COREP) filings, and whether they can easily and effectively audit their entire
reporting process.

As FDSF enters a new stable phase, it is time for banks to consider how they can take a
more strategic approach to compliance.