APRA’s 5-year roadmap on the direction of granular data collections (GDR) and transition from D2A to APRA Connect
In March 2022, the Australian Prudential Regulation Authority (APRA) published a discussion paper outlining a five-year plan to transform its data collection approach for the financial industry, with a focus on granular data collections. In this discussion paper APRA provided a timeline for the proposed changes and explained the rationale behind them. APRA then engaged with industry stakeholders through roundtables and written submissions in response to the consultation paper. In December 2022, APRA released a response paper addressing issues raised during these consultations and providing more detailed roadmaps for designing and implementing new granular data collections specific to each industry.
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APRA has noted in its communication that the roadmap for the transformation project is ambitious and will require significant investment from the industry over the next five years. The proposed shift to more granular data collections aims to provide APRA and other stakeholders with deeper insights while also reducing the burden on the industry. Additionally, APRA aims to transition all data collections to APRA Connect by 2027, allowing for the full decommissioning of the Direct to APRA (D2A) data collection tool.
Key feedback from APRA:
1) Seek support for alignment of reporting entities strategies with APRA’s direction:
Key areas that APRA sought feedback on during consultation, were the alignment of entities’ strategies with APRA’s direction for data collections and the importance of transitioning all data collections to APRA Connect.
1.1 Key feedback from the industry to APRA during consultation phase:
- The industry provided valuable insights, indicating long-term investments in centralized capabilities and data office functions. Varying stages of data capability uplift programs were also reported across all industries, with many entities seeking support from regulatory technology third parties (RegTechs).
- While there was a strong desire for all collections to be transitioned to APRA Connect, concerns were raised about the potential for increased reporting burden and costs associated with more granular data collections.
- The industry requested a clear articulation of the benefits of transitioning to granular data collection to justify the additional compliance burden and challenges.
1.2 Response from APRA:
1.2.1 Granular data collections can enhance regulation by providing a more complete and accurate picture of various industries
- APRA responded that it is committed to using data to drive informed decisions by both internal and external stakeholders, and to advance its purpose and strategy by improving regulation. As part of this effort, APRA is investing in data and integrating it as a core enabler. By adopting a risk-based and outcomes-focused approach, supported by data, APRA is better positioned to fulfil its mandate. Enhanced data collections will enable APRA to shift its focus away from processes and towards targeted supervision, making it a more efficient regulator. Additionally, access to richer and more flexible data will provide a stronger evidence base for policy development, supporting more informed decision-making.
1.2.2 Push for capability uplift within the industry
- APRA expects well-managed entities to prioritize the improvement of data risk management, data capabilities, and systems in accordance with industry best practices and regulatory guidance. Investing in these areas can yield commercial benefits while also streamlining regulatory reporting processes.
- APRA acknowledges the vital role that RegTechs play in enhancing automation and efficiency. To support this, some RegTechs have been utilizing APRA Connects test environment to iteratively develop their solutions before final testing with reporting entities. This approach has resulted in significant efficiency gains for both reporting entities and RegTechs.
2) Laying the groundwork for successful implementation
During consultations, APRA welcomed feedback on the timing, sequence, scope, and methodology of data collections, especially those planned for 2024 and beyond.
2.1 Key feedback from the industry to APRA during consultation:
- Entities expressed a need for more detailed plans to prepare fully for the implementation of the collection roadmaps. They require sufficient time, information, and support to develop reporting requirements.
- Stakeholders recommended involving the industry in the early planning stages to manage timeframes, provide sufficient lead time, set clear expectations on parallel runs and best endeavour collections, and avoid tactical solutions for meeting short-term data collection goals.
- Stakeholders requested the early development of an overarching data model with detailed information on the required data granularity. This step is crucial to ensure alignment, consistency of definitions, and the establishment of a single taxonomy that covers all collections, including those of other agencies.
2.2 Response from APRA:
APRA has taken note of the industry’s concerns regarding the scope and implementation timeframes of the proposed collection roadmaps. In response, APRA will collaborate with the industry to mitigate implementation risks.
2.2.1 Risk management for project implementation
- APRA has emphasized its commitment to managing and mitigating risks associated with large-scale, multi-year programs. To achieve this, APRA has implemented a risk management framework with assurance processes in place. This ensures that all potential risks are identified, considered, and addressed with appropriate mitigation plans and contingencies.
2.2.2 Collaborating with Industry stakeholders
- APRA is committed to addressing the challenges of delivering the long-term roadmap and will collaborate with industry to minimize impacts wherever possible. To ensure smooth implementation of new collections, APRA aims to provide at least nine months of lead time from when the reporting standard is finalized to when the first data is submitted, whenever possible.
- APRA recognizes that co-development of data models with the industry is crucial for the successful implementation of complex granular collections. To facilitate this, APRA plans to engage with the industry during the conceptual phase and utilize pilot groups to iteratively develop and test the models.
- APRA will conduct an annual review of the long-term roadmaps to assess their effectiveness and make adjustments where necessary. This may include changes in sequencing, timeframes, and scope of collections.
3) Evaluating the costs and benefits
APRA recognizes that the proposed timelines are challenging, and considerable effort will be required from both APRA and reporting entities to meet them.
3.1 Key feedback from the industry to APRA during consultation:
- A significant investment is anticipated by industry to uplift data capabilities and prepare for new reporting requirements. Whilst benefits may accrue in the long term, stakeholders indicated that it was difficult to determine at this early stage the timing and magnitude of benefits to be realised.
- A challenge noted by entities is ensuring the appropriate data quality and assurance is in place for data submitted in these granular data collections. All industries are seeking more detailed guidance on data quality expectations with further costs expected for audit and assurance activities.
3.2 Response from APRA:
3.2.1 Working with industry to develop a framework that supports data quality outcomes for more granular collections
- APRA acknowledges that it is aware that ensuring appropriate data quality for more granular collections is a significant challenge for industry. To address this, APRA is committed to developing a targeted framework in collaboration with the industry, which will evolve over time to become comprehensive data sets. The framework will take a risk-based approach to ensure that quality expectations are met for the most critical data elements while minimizing associated burden.
- APRA mentioned that it has conducted a series of thematic reviews on data risk management practices, and it will share high-level insights with the industry. These insights will help inform the development of a targeted framework that delivers appropriate data quality outcomes for granular collections early in the implementation of the roadmaps.
4) Collaboration with the Industry
4.1 Key feedback from the industry to APRA during consultation:
- Industry stakeholders emphasized the importance of early engagement and co-design with APRA through various channels, such as working groups, roundtables, proof-of-concept trials, and pilots. This collaborative approach was seen as essential for achieving effective data collection design and successful implementation of new collections.
- To support the development and implementation of new collections, industry stakeholders called for APRA to provide comprehensive information, guidance, and artefacts, as well as formal documentation to facilitate planning and investment approvals.
4.2 Response from APRA:
- APRA is dedicated to engaging with peer agencies, industry associations, and entities in an open, timely, and transparent manner. To meet the needs of each collection, APRA will customize its engagement activities, such as conducting workshops with entities early and regularly, forming product or form-specific working groups, holding roundtable discussions, and hosting Q&A sessions.
- RegTechs and service providers are crucial components of the reporting ecosystem, and APRA will continue to work with them as it develops and designs new collections and expands the technology.
- APRA aims to collect data once and share it with peer agencies, and it will continue to strengthen its partnerships with them regarding data collection.
APRA has released high-level roadmaps across various industries:
- To provide better visibility and enable effective planning, APRA has released detailed roadmaps for each industry (Banking, Superannuation, Insurance etc.), outlining the phased implementation of reporting requirements. The roadmaps have been refined based on industry feedback, and now specify the reporting standards impacted in each phase, along with an estimated timeline for engagement and consultation.
- While firm implementation timeframes will be communicated as each collection progresses, APRA acknowledges that changes may be necessary due to various factors such as macro-economic conditions or policy priorities. To ensure successful implementation, the agency plans to review the roadmaps annually and adjust them as needed.
The following provides an overview of the Banking Industry roadmap, outlining the effective dates of reporting standards in chronological order.
Pavan Kumar Pothuraju,
Head of Regulatory Product Management APAC