Introduction to the Open Data Ecosystem in the Financial Sector

In the last decade one of the most important financial crises in contemporary history took place. This financial earthquake that has shaken the world is greatly due to the risks that the entities of the sector were assuming as part of their business. The problem not only lies in the assumption of the risk itself, which is inherent in any activity, but in the ignorance of the nature of those risks and the impact and overall consequences given the interrelationship of the whole economic system worldwide.

As a result, the following lesson has been learned: the regulatory and supervisory frameworks were not the most appropriate. In fact, they were not designed to detect both the over-exposure to risk and the lack of balance related to the capital adequacy of financial institutions. And because of these shortcomings, these agencies were not prepared enough to deal with the adverse events that occurred. Thus, in this context and with this objective, in the last years two new regulatory frameworks have been developed:

• Basel III, in the case of banks (Directive 2013/36/UE and Normative UE nº 575/2013); and
• Solvency II, in the case of insurance agencies (Directive 2009/138/EC and Directive 2014/51/UE)

The two directives include a key section from the point of view of transparency and open data in the financial sector, known as Pillar 3. Pillar 3, in both regulatory frameworks, refers to the information publication and the need for transparency by banks and insurance companies.

This transparency takes place on two levels: on one hand, from the entities to the market (in a commercial sense: customers, shareholders or investors, as well as society in general). On the other hand, from the entities to the Administration (i.e., the Regulator), who also, in a complementary way, has to comply with certain open data commitments, especially at entity level and product line. In this way, and in compliance with this obligation, the competent bodies also publish open reports and statistics such as, in the case of Spain, the General Directorate of Insurance and Pensions, which is responsible for supervising the insurance sector.

The extraction and publication of these quantitative data requires a reporting model that guarantees the quality and consistency of the information. Nevertheless, the publication of data by financial institutions and administrations, required by the regulation and supervision frameworks, is still in the process of technological exploration. In spite of this barrier, as in other industries, it is necessary to develop common guidelines as soon as possible to guarantee homogeneity in the openness and availability of financial data.

Thus, as a starting point and in order to standardize this reporting model among all financial institutions, the XBRL (Extensible Business Reporting Language) standard is now available, which allows interoperability and analysis of financial information according to European regulations.

After all, the improvement of market transparency will first enable financial institutions to have standardized and comparable information on the solvency of companies. In this way, we have the necessary arguments for making economic decisions. And, on the other hand, such financial transparency would make possible for all entities with economic activity, irrespective of the sector to which they belong, to publish their data in an open and standard format, with no added costs, comparable with other sources and reusable by the rest of the open data community.