Date of meeting: 30 November 2021
Location: This meeting took place via Microsoft teams
The joint transformation programme is publishing its committee minutes. These materials are published in the interests of transparency. Any opinions, proposals or policies contained in them are those of the joint transformation programme or, as the case may be, its groups, committees or individual members. They do not represent the opinions, proposals or policies of the Bank of England, the FCA or other participants and they should not be taken as an indication of future policy. Information that is confidential or commercially sensitive has been omitted.
Minutes
Item 1 – Introduction
AD welcomed all to the meeting. AS recapped the actions from the previous meeting (approval of the October minutes; Secretariat to circulate use case details; DSC members to provide details of their use case experience; Secretariat to circulate of firms interviewed for CRE workstream).
The Committee confirmed its approval of the minutes. AS committed to circulate the list of firms interviewed for CRE.
Action: Secretariat to circulate list of CRE workstream interviewees.
Item 2 - Form DQ deep dive – counterparty classification
EM presented the problem statements that the Form DQ discovery process has created. These explain what the delivery group has diagnosed as the problems with the current process. These included costly processes of maintaining multiple data mappings to satisfy the requirements and quality assurance checks in order to meet regulatory expectations.
EM introduced the delivery group’s proposed solutions. MB presented detail on some specific proposals, relating to counterparty classification. Firms must classify counterparties to report Form DQ, using a taxonomy specific to UK statistical reporting. Firms have to apply the classifications themselves, resulting in duplication of effort and variations in classification.
The delivery group proposes that the Bank and FCA standardise the counterparty category definitions. A regulator could maintain a central mapping matrix that could potentially map from entities using LEI to the relevant ONS counterparty classifications.
Members agreed that this was a useful proposal, and mentioned that this offered a solution to a problem the industry had been raising with regulators for some time. Counterparty classification can involve lots of work e.g. bilaterally contacting counterparties to gather information. Members agreed that this sort of system could be beneficial to various reporting and therefore could be scaled.
Members queried what a new standard system would add when there are existing initiatives for classifying counterparties such as NACE. MB explained that NACE codes do not explain ownership considerations for example, and only tell you at a high level what industry an entity operates in, rather than detailed information like whether it is a Major Financial Institution.
Members suggested that regulators consider what level of coverage firms should achieve over their derivative portfolio, and whether any materiality threshold would apply.
Members discussed various ways this could work and who could have ownership. Members thought the Bank, FCA and even Companies House were all appropriate hosts. Some members did not think that an existing source would fulfil the function described, but mentioned the DALI system as a good example – parties submit data anonymously, forming a data pool, where matching submissions serve as validation. Members agreed that any solution would need to overcome issues around data sharing and confidentiality.
Item 3 - Form DQ deep dive - quality assurance
EM presented a deep dive on another problem identified by discovery. Quality assurance around Form DQ reporting is not standardised and is a repetitive process. This is time-consuming for firms and the Bank, involving cross-validation, variation analysis and plausibility checks. The delivery groups proposed development of a centralised tool with controls and validations built in. This could save the Bank time spent on checking submissions and save firms cost spent on implementing bespoke procedures.
Members supported the idea of a tool that performed standardised variance analysis. They added that it would be helpful if it was integrated into submission systems like BEEDS / RegData, rather than housed separately.
Item 4 – CRE use case – problem statement
SH presented the results of discovery work for CRE. The discovery work has identified several problems including inconsistent scope and coverage, ambiguous reporting instructions requiring interpretation work, inconsistent requirements across returns and underlying data quality issues.
PT presented a deep dive on one particular issue – the definition of loan-to-value. There is no clear and specific data definition for LTV. Reporting instructions allow flexibility in how firms define this. Discovery has shown that the Bank and firms would consider differing LTV definitions as the standard.
Some members suggested that loan-level data collected by the Bank could solve this issue, if there were additional fields explaining when properties were last valued etc. This would give greater transparency around the LTV numbers.
Other members thought that it was not a case of adding additional data points in this way but ensuring comparability of data through greater standardisation. They wanted to avoid a situation where the Bank was extrapolating figures on valuation based on past data.
Members also supported solutions that could be extended to residential mortgages. They thought it made sense to devise lasting solutions now than return to it later.
Item 5 - Data standards review
AM presented a proposal to commission an external review on data standards. This would analyse the value and opportunity provided by data standards, how standards can be developed and the circumstances that lead to successful adoption.
Members agreed to commission such a review. They asked that the review contain an element of public consultation, so that it can gather input from small firms. Members requested that both the derivatives and CRE use cases were considered in the review.
Action: Secretariat to commission data standards review and report back to DSC as necessary.
Item 6 - Forward agenda / AOB
AS presented the group’s forward agenda, with the next meeting scheduled for early February. There will be further discussions on use case solutions.
AD suggested that Secretariat add an item to the forward agenda to explain the role of the Board and its relationship with DSC. He also suggested that all future meetings last two hours in order to allow the necessary detailed discussions.
Action: Secretariat to add item on the Board’s role to the next meeting agenda.
Actions agreed in this meeting
- Secretariat to provide list of firms interviewed for CRE.
- Secretariat to commission data standards review and report back to DSC as necessary.
- Secretariat to add item on the Board’s role to the next meeting agenda.
Attendees
Ffion Acland (FA), Goldman Sachs
Stephen Anderson (SA), Lloyds Banking Group (TDC Delivery Group)
Miles Barker (MB), Credit Suisse (TDC Delivery Group)
Julian Batt (JB), Bank of America
Andy Beale (AB), Financial Conduct Authority (Interim TDC Programme Manager)
Gabriel Callsen (GC), International Capital Market Association
Andrew Douglas (AD, Chair), Depository Trust and Clearing Corporation
Dayo Forster (DF), Bank of England (Product Owner)
Lee Fulmer (LF), UBS
Dawd Haque (DH1), Deutsche Bank
Dave Holland (DH2), Coventry Building Society
Sharon Howells (SH), NatWest (TDC Project Manager)
Caroline Lewis (CL), Lloyds Banking Group
Elizabeth Maloney (EM), JP Morgan (TDC Project Manager)
Angus Moir (AM), Bank of England (Transformation Programme Lead)
Corinne Powley (CP), Phoenix Group
Aaron Shiret (AS), Bank of England (TDC Secretariat)
Ian Sloyan (IS), International Swaps and Derivatives Association
Nicholas Steel (NS), Barclays Group
Paul Thirtle (PT), NatWest (TDC Delivery Group)
Andrew Turvey (AT), Belmont Green
Rebecca Whitwam (RW1), Bank of England (TDC Secretariat)
Rumeet Wadhwa (RW2), Santander (TDC Delivery Group)
Richard Young (RY), Bloomberg
Apologies
Rebecca Ding, Financial Conduct Authority (Transformation Programme Lead)
Lewis Reeder, BNY Mellon
David Shone, International Securities Lending Association
Tammy Solomon, Investec