Monitoring retail and corporate loans and related processes is one of the main responsibilities of central banks throughout the world since the 2008 financial crisis. The Hungarian National Bank developed a comprehensive reporting framework called HITREG (acronym for Loan Register) which enables all banks under Hungarian legislation to report detailed data concerning Retail and Corporate lending activities. Fulfilling the reporting obligation posed a great challenge to many Hungarian Banks, many of them chose Advocate consultants to analyse the requirements of the new reporting framework, design and develop Business Intelligence solutions in order to tackle the challenges of the mandated monthly report.

Strict and comprehensive validation rules, data quality issues

The new HITREG reporting framework requires all Hungarian banks to report the following analytical data:

• Detailed data on each and every lending contract (housing loan, personal loan, project development loans, leases, current account overdrafts, syndicated loans), providing information on the original and outstanding amounts, contract dates, rate fixing frequencies, etc.
• All transactions related to loan contracts: disbursements, scheduled monthly repayments, early repayments, late (already due) payments.
• All collateral data (type of collateral, initial valuations) and up-to-date valuations based on recent appraisals.
• Detailed counterparty data based on different customer types (natural person, corporation, foreign corporations) and customer roles (debtor, co-debtor)
• Links between instruments, collaterals and counterparties.

The new reporting obligation posed a big challenge to banks, because the regulator developed a robust and strict validation framework that automatically rejects any reporting package that has a single error, regardless the severity or type of it. The mentioned framework handles different types of errors: checking mandatory fields, checking data formats and constraints, but the most challenging validation types are the business logic and integrity validations.

Needless to say, a strict and comprehensive validation set requires very high data quality, which is the biggest obstacle in case of many banks due to mostly paper-based loan origination processes and low degree of digitalization.

Because of the robust requirements, fulfilling HITREG reporting obligation was not an easy task, several projects were started with Advocate consultants on board to help our clients.

Consolidating and connecting underlying data

projects with the goal of being able to generate the necessary HITREG reports containing all the necessary data with the highest data quality available. For achieving this, the following tasks were done by our consultants:

• After several interviews with lending officers our consultants successfully documented the lending workflows (for both Retail and Corporate Loans), identified data originating source systems in the architecture landscape.
• Provided detailed specification of a HITREG data mart which would be responsible for collecting, consolidating the required data in order to generate the HITREG-reports
• During testing period identified the major data quality issues, provide detailed list of business entities with flawed/unprocessable data for business stakeholders
• Constantly communicating with the regulator (Hungarian National Bank) and business stakeholders
• Design and provide training of a proper workflow and business process for reporting officers to be able to fix certain types of errors before submitting the report package to the authorities

With the help of Advocate Project Managers our consultants were able to help our clients with a carefully planned project plan and detailed specifications to launch a multi-release project that enabled the on-time delivery of the data mart and made sure our clients were able to meet the deadline of the reporting obligation and continue to submit the reporting package every month.