FSRA is seeking to modernize the way it collects data from credit unions to improve the utility of the data for risk assessment purposes in support of Principles Based Regulation (PBR).
Roll out of the new initiative will begin in the summer of 2023 and will progress in waves with a tentative goal of having all credit unions on the system by the end of June 2024. Since the launch of the current eFiling system in 2011, data requirements for credit unions were last updated in 2017. The current data form does not support credit unions’ risk assessment under the new Risk Based Supervisory Framework implemented in April 2022.
The Enhanced Data Collection (EDC) initiative will modernize the way data is collected from Ontario credit unions and caisses populaires. EDC will bring about two primary changes:
The collection of instrument-level data, such as loans and deposits data.
The migration of all existing reporting, including new instrument-level data, into one channel.
There are many benefits to this approach:
automating data collection will reduce the burden for credit unions
the potential for reduced capital requirements (for certain verifiably lower risk assets, beyond the current capital risk weightings)
improved Deposit Insurance Reserve Fund (DIRF) adequacy assessment
better data and reporting back to credit unions
For the new instrument-level data, credit unions are only expected to provide data points which are available at the time of launch. Within one year of implementing the EDC, the instrument-level data is expected to be sufficient to replace the existing data on the Monthly Information Return (MiR) and Annual Information Return (AiR).
Afterwards credit unions are asked to progressively add more data points in alignment with their future capacity and supervisory needs.
Regulatory Data Standard (RDS)
A Regulatory Data Standard (RDS) is being developed to document and standardize data that can then be used for regulatory and risk purposes.
The data standard is a dictionary of data points that will ultimately improve the data quality and make collecting, reporting and accessing the data more efficient for both FSRA and Ontario credit unions.
An overview of the EDC initiative can be found at the following link: EDC Overview
FSRA is planning to release a public consultation on the draft Regulatory Data Standard in January 2023. The purpose of this consultation is to get feedback on the draft Regulatory Data Standard which can be found below:
The data will be collected by way of an automated system that extracts the data from credit union records.
The new data requirements will be defined in a Regulatory Data Standard (RDS). The RDS consolidates all existing data reporting (Regulatory Data) and adds new Risk Data templates.
Risk Data (or instrument-level data) is data that pertains to a specific instrument such as a loan or deposit. Examples include Date of Origination of loan and Outstanding amount of loan. For each loan (instrument) a number of data points would be reported.
Regulatory Data includes all information that is currently reported by credit unions such as the MiR, AiR and financial templates.
To allow for an orderly migration from existing reporting formats to the new system, the EDC template will allow credit unions to progressively add more data from the RDS over time.
Currently, the MiR includes various aggregated data primarily for loan and investments. To avoid duplication in the future, this data will be derived from the instrument-level data. MiR reporting of these fields will remain until the EDC-reported instrument-level data is sufficient to replace the aggregated data in the MiR which is expected to occur within one year of a credit union changing to the new system.
Similarly, once all other reporting such as financial templates are fully migrated to EDC, the current reporting formats will no longer be required.
All Regulatory Data will be collected on the same schedule as currently in effect, for instance financial templates currently collected on a quarterly basis will continue on a quarterly basis. Instrument-level data will be collected monthly.
The system will be capable of accessing data from source systems as well as from intermediate sources provided by the credit union. Accessing data from the source of truth system, such as the banking system, provides the greatest opportunity for automation and reduced burden for credit unions. However, credit unions can choose how they want the data to be extracted.
Yes, the goal is to fully replace the MiR/AiR, but we want to balance the desire for an orderly transition against the effort of maintaining dual reporting formats at credit unions for an extended period of time.
Within one year of changing to the new system, it is expected that each credit union will be providing sufficient Risk Data to replace the data currently in the MiR/AiR. Once this occurs these fields can be removed from the MiR.
Also, once all the remaining data from the MiR/AiR has been migrated to the EDC system, the MiR/AiR can be fully decommissioned. As yet there is no formal deadline for this, we would welcome feedback on this.
There is a general recognition among various regulators around the world of the risks of weak and fragmented risk data and the need for enhanced data in the modern age. The Basel Committee on Banking Supervision (BCBS) in 2013 issued Principles for Effective Risk Data Aggregation and Risk Reporting (RDAR) which sets expectations regarding management and reporting of risk data.
Various central banks and financial regulators around the world, such as the Prudential Regulatory Authority in the United Kingdom, have initiatives to improve the effectiveness and efficiency of data collection. Others such as The Oesterreichische Nationalbank (OeNB) in Austria have already implemented systems to address data concerns.
In Canada, the following organizations collect instrument-level data:
British Columbia Financial Services Authority (BCFSA) currently collects instrument-level data. The FSRA instrument-level data templates are based on the BCFSA materials.
Under the Canada Deposit Insurance Corporation’s (CDIC) Data and System Requirements, members are required to implement a method of identifying, capturing, organizing, and producing deposit liability data on an instrument-level.
Canada Mortgage and Housing Corporation (CMHC) collects instrument-level data points on certain mortgages
This is not a complete list and many other regulators likely collect this information through internal or ad hoc requirements.
Sections 198 and 199 of the CUCPA allow FSRA for the purpose of carrying out its powers and duties under the CUCPA (directly or through delegated authority from the Chief Executive Officer) to require credit unions, their subsidiaries and any other person to provide data.
Items such as “address of collateral” for retail loans, for instance, would be personal information under FIPPA. There are a small number of data points in the Retail Loan schedule such as this which would make the Retail Loans schedule “personal information” under the FIPPA.
FSRA’s collection of the data is permitted under FIPPA. The data is necessary for assessing credit union risk profiles and ultimately the effective implementation of Principles Based Regulation and Risk Based Supervision. Section 38(2) of FIPPA permits the collection of information “necessary to the proper administration of a lawfully authorized activity”.
FSRA would be able to refuse access to any of the data collected that would qualify as either “personal information” or “sensitive commercial information” relating to credit unions under s. 21 and 17(1) of FIPPA.
