Introduction
How can a bank not only cope with regulatory challenges and the information needs that follow from them, but turn them to its advantage?
Regulatory requirements are unavoidable for banks. They become expensive above all where legacy IT landscapes meet new rules: many data sources, numerous bespoke solutions and products from different vendors, all of which must be coordinated whenever something changes. Most institutions will recognise the consequences:
- Business and IT resources tied up
- Unpredictable change costs
- Heavy manual effort for management reporting
- Lengthy coordination between vendors
Integrated bank management on a unified data foundation
At its core is an integrated, open solution for managing the whole bank, with a small number of non-redundant interfaces, transparent data flows and a single business data foundation, supported by data governance.
The solution unifies:
- Data structures and delivery routes
- Calculation methods and business rules
- Workflow and processing control
- Interfaces
This gives banks consistent key figures for integrated bank management, consistent workflows across all use cases, and simulations drawn from the same data foundation.
Are regulatory reporting and risk management still operating on separate data foundations in your organisation? What is preventing a more integrated approach?
The architecture scenario for banks in SAP Business Data Cloud (BDC)
An SAP-based architecture scenario has three areas:
1. Operational systems
Sources include SAP S/4HANA, with SAP Finance, SAP Business Partner and SAP Core Banking, as well as non-SAP systems such as trading systems, other systems of record and calculation software (e.g. MARZIPAN).
In the target architecture, S/4HANA provides data through Core Data Services (CDS) views. These are virtual structures that hold no data of their own and rely on fixed SQL queries against the application tables. Examples include business partner, loan and collateral data.
2. SAP Datasphere
Data passes through three layers: Inbound → Harmonization / Propagation → Outbound / Reporting.
Cross-cutting functions sit on top of these layers: virtualisation, historisation and versioning, data lineage, roles and authorisations, monitoring, and data quality rules.
The business data model in the Propagation layer must cover, among other things, master data (business partners, financial transactions, collateral), posting and transaction data, balance sheet data, non-performing items, earnings and valuation data, and market data. The model is historised bitemporally or according to purpose of use.
3. Analytical and reporting systems
An integrated regulatory reporting, risk management and controlling solution, such as msg.ORRP (Open Risk & Reporting Platform). It covers risk management (including market, credit and liquidity risk, and forecasting) and regulatory reporting (including Common Reporting (COREP), Financial Reporting (FINREP), the Integrated Reporting Framework (IReF) and statistical returns). It runs on one shared platform with central methods, data quality, error management and integration with identity and access management (IAM).
SAP Analytics Cloud acts as the reporting layer, offering standard analyses, self-service and AI-assisted queries. Live connections suit sensitive data; imports suit management reporting and analytics.
Further BDC components can be added as required, such as SAP Databricks, SAP PaPM (Profitability and Performance Management) and ESG business content. Customer-specific extensions can, of course, be integrated too.
Banks can combine the move to a common data foundation in SAP Datasphere with a modernisation of SAP Business Warehouse (BW).
Conclusion
Banks unlock the potential of integrated bank management when regulatory compliance, risk management, management and financial accounting, sales and treasury all run their reporting on unified, harmonised data on a single platform.
One implementation of this principle is msg for banking’s open finance architecture (ofA). Read more: SAP for Banking: Greater Efficiency for the Financial Industry | msg
Many banks are also facing the move to S/4HANA at the same time. Our article S/4HANA-Migration bei Banken: Warum die Wahl zwischen Brownfield, Greenfield und Selective Data Transition zur Kostenfrage wird – Banking.Vision explains how SEM Banking functions are split across PaPM, TRM (Treasury and Risk Management) and SAP Analytics Cloud. Banks planning both projects should design the data foundation for the two together.
The open finance architecture (ofA)
The ofA is msg for banking’s architectural approach to integrated bank management and reporting. It puts the principles described above into practice: a central data foundation, shared calculation methods for risk management and regulatory reporting, and a small number of non-redundant interfaces. Technically, it builds on SAP Datasphere for data management and SAP Analytics Cloud for reporting, and it can be combined with SAP PaPM and modernised BW systems.
