Transforming data collection - Phase one recommendations with Bank and FCA response

Overview of the Transformation Plan and joint transformation programme

In February 2021, the Bank of England and FCA published an update on their work to transform data collection. The update proposed to make major reforms to data collection over the next decade, in order to give regulators better quality data while minimising the burden of that data collection on firms. The Bank and FCA summarise this goal with their vision statement for transforming data collection ‘that they get the data they need to fulfil their mission, at the lowest possible cost to industry’.

In the update, the Bank of England and FCA laid out three key reforms they think are central to achieving this vision:

1. Modernising reporting instructions to improve how the Bank and FCA’s reporting instructions are written, interpreted and implemented. There are a range of steps this may involve, from setting up better Q&A processes to potentially rewriting instructions as code.
2. Integrating reporting to move to a more streamlined, efficient approach to data collection. This reform includes making data collection more consistent across domains, sectors and jurisdictions, and designing each step in the data collection process with the end-to-end process in mind.
3. Defining and adopting common data standards that identify and describe data in a consistent way throughout the financial sector. These common standards should be open and accessible for use by all who need them.

To help deliver these reforms the Bank and FCA set up a ‘joint transformation programme’: a collaboration between the Bank, FCA and industry. The joint transformation programme had three aims:

1. To identify the issues and challenges faced by authorities that use the data, and by industry participants that supply the data;
2. To design and test new approaches and solutions to those issues;
3. To consider the business case for the development and delivery of the solutions.

Development of recommendations

Phase one discovery and design

The ‘joint transformation programme’ launched in July 2021. To date the joint transformation programme, and associated Reporting and Data Standards Transformation Board, has involved over 100 people from over 40 organisations. Participants have included regulated financial services firms, trade associations, standards bodies and technology firms.

The joint transformation programme uses the Government Digital Service’s industry-standard Service Design Approach (the SDA). The programme is run in ‘Phases’ with each phase being made up of a number of use cases. (A use case defines the scope of the programme. The Bank and FCA define a use case as a collection, set of related collections or aspect of a data collection). Within each phase, each use case will, in turn, pass through a ‘discovery and design’ stage, where the programme will explore issues and design solutions, and then an ‘implementation stage’ (Beta), where solutions will be developed and tested for delivery.

The work of the programme ran from July 2021 until May 2022. A full-time team of staff from industry, the Bank and the FCA carried out the work. Staff from the Bank and the FCA also carried out supporting activities (such as running the programme management, governance, and communication and engagement functions).

The first ‘discovery and design’ stage of Transforming Data Collection looked at three use cases. The choice of use cases drove which areas of data collection the programme team focused on. In turn, this impacted the problems and solutions that the team prioritised. The Bank and FCA selected the use cases after consultation with industry. More information on phase one use cases and how they were selected can be found in the ‘Use case selection’ section of the Transformation Plan.

The use cases selected for phase one were:

• Commercial real estate ‘CRE’ data (Bank use case) – with a focus on improving the quality and coverage of commercial real estate data available to the PRA and the Bank’s directorate for Financial Stability Strategy & Risk.
• Quarterly derivatives statistical return ‘Form DQ’ (Bank use case) – aiming to design improvements to data on the derivative asset and liability positions of the UK financial sector. This data ultimately feeds into the UK’s balance sheet compiled by the ONS.
• Financial resilience survey (FCA use case) – looking to formalise a post-pandemic ad-hoc collection of select data points from FCA firms, used for prudential risk monitoring.

Phase one findings

Through a process of workshops and discussions between SMEs from industry and regulators, the delivery teams identified similar issues across the different use cases with seemingly similar root causes. Some of these issues were:

• User experience challenges (such as users finding it difficult to find the right information they need to prepare reports, including the context and rational for the collection),
• Difficulties firms face in understanding and interpreting requirements,
• Issues firms and regulators face in providing and receiving feedback on data quality,
• A lack of understanding by firms on the impact the data has on the regulators (such as how the data was used to improve decision-making),
• Concerns that the same or similar data was being collected across multiple collections.

The collective impact of these issues for both regulators and regulated are:

• Time wasted,
• poorer data quality e.g. because of misinterpretation of instructions,
• reduction in the usability of data for regulators, for instance due to a lack of comparability between collections,
• frustration and stress for those people involved in data collection and those who use the data.

The similar issues identified across the different use cases supports the programme hypothesis that the Bank and FCA can redesign the data collection process in a much more effective way.

Governance of recommendations

The delivery team developed the recommendations (and the solutions they relate to) during the design or ‘alpha’ stage of the programme. Each proposed recommendation was reviewed and approved by one of the joint transformation programme’s two governance committees (see Terms of Reference). Recommendations were presented to either the Reporting Transformation Committee or Data Standards Committees depending on the solution’s relevance to the committee's remit and area of experience.

The Bank and FCA convened the two governance committees, the Data Standards Committee and the Reporting Transformation Committee. They designed the committees to represent the views of reporting firms, as well as having the appropriate knowledge and expertise to perform the task they were given. Each committee was comprised of senior employees of PRA/FCA dual-regulated reporting firms, FCA solo-regulated firms or trade associations. More information on the nomination and selection process for the committees, as well as committee membership, can be found on the Transforming data collection page.

Joint transformation programme committees' recommendations

The joint transformation programme made seven recommendations to the Bank of England and FCA. The recommendations are aimed to target a selection of the issues identified by the delivery team.

The industry committees made recommendations for Form DQ and the Financial Resilience Survey use case. The programme expects that the committees will make recommendations for CRE data at a later date.

The recommendations are a key milestone of the first phase, which;

• provide a clear explanation of what actions the joint transformation programme (as representatives of industry) think should happen to improve data collection,
• are aimed at data or reporting executives in the Bank, FCA, reporting firms, or other organisations who are part of the supply chain that supplies data to users in the Bank or FCA,
• set out suggested credible, valuable, change that starts to deliver the vision of the programme; and
• indicate how feasible those changes may be to deliver, and what the benefits of those changes might be.

Response to recommendations

The Bank of England and FCA today published their response to the recommendations.

The joint responses represent the views of the Bank and FCA. They take into account the views of a wide range of stakeholders in both organisations, at both senior (CEO, governor, deputy governor and executive director level), and working levels.

The stakeholders in both organisations were very supportive of the recommendations, which they felt provided a balanced mix of shorter term wins and longer term transformational improvements.

The Bank and FCA agreed to accept all of the recommendations made by the industry committees in principle. For some recommendations, the Bank and FCA are keen to move to delivery of solutions immediately. For other recommendations, the joint transformation programme will need to explore the solutions further to understand how they might be delivered and the associated business case. If the Bank and FCA find that there is a business case, then they will add such recommendations to their future roadmap for transformation.

The recommendations and the regulators' responses to them are summarised in the below table (for ease of reading, some details are not exactly as recorded in the documents. In those cases, the documents should be considered the accurate source):

• Read the recommendations in full.
• Read the Bank and FCA’s joint response to the recommendations.