European banking supervisors reveal plans for digital reporting

30 June 2005

Yesterday the auditorium of the Chartered Accountants Hall in London filled with over 200 representatives of the European Banking Industry and the European regulatory bodies. They discussed the joint effort necessary to improve speed, efficiency and quality in regulatory reporting through the use of digital reporting practices. Speakers, representing European regulators, banks and standards bodies, showed that all prerequisites for digital reporting are realised or close to completion and that the next two to three years will show a revolution in the way Financial Service companies will report. The event focussed on the initiatives to support Basel-II reporting through the open standard for digital reporting XBRL.

José-Maria Roldan, Chairman of the Committee of European Banking Supervisors (CEBS) stated that XBRL is important for supervisors because of its positive effect on market efficiency. 'By improving information flows we will introduce greater efficiency, speed and integrity which will make the European financial markets more competitive. XBRL appears to be invented for Europe with its many pan-European banks and European reporting standards.' The CEBS is supporting the development of two so called 'taxonomies' or dictionaries as record in the XBRL standard. The COREP taxonomy defines common reporting of the solvency ratio and the FINREP taxonomy serves as a common reporting framework for financial data. These initiatives will take advantage of the fact that Basel II and IAS will require all supervisors to change their reporting requirements. According to Mr. Roldan 'Common EU reporting faces a tradeoff between simplicity through limited change versus communality. XBRL will enable us to establish that balance. The role of XBRL in Europe as an organisation is crucial for coordinating and avoiding inconsistent results within Europe.'

According to Pierre-Yves Thoraval, Deputy General of the Secretary of the French Banking Commission, COREP is a new ratio, a new challenge and a new opportunity to reduce the regulatory burden. It provides flexibility, consistency and standardization. 'Data deemed necessary for all supervisors, specific for a country and specific for a regulator or even specific for a company can be combined. 25 countries participate in finalizing the COREP taxonomy and the plan is to finish by the end of the year. The use of COREP and FINREP XBRL taxonomies will of course be free of charge.'

Gérald Santucci, Head of Unit "ICT for Enterprise Networking" of the European Commission, praised the role of XBRL in Europe in organizing the event and contributing to the awareness in order to raise the interest for XBRL, 'the standard that introduces tagging of business data and is appealing because of its simplicity. Investors, growing in numbers, need to understand the information put in front of them. However,' according to Mr. Santucci, 'there still is a lot to do to raise awareness and to dissimilate knowledge and best practices. It is encouraging to see that large numbers of new software applications are being introduced and that XBRL is being used more and more for various uses, such anti money laundering, tax reporting and statistic reporting. XBRL supports the shift from information economy to the knowledge based economy and provides the necessary platform. It supports the Lisbon Strategy for Europe to become the most dynamic and competitive knowledge based economy in 2010. XBRL contributes to a single market through transparency, efficiency and creation of public trust and contributes to the exploit the potential of single market. There is no reason to wait any longer!'

Tom Jones, Vice-Chairman of the International Accounting Standards Board, illustrates the similarities between XBRL and IFRS, they both serve to simplify financial reporting and they both represent a great achievement. 'The speed and the size of the adopting organizations is phenomenal. There is obviously an excellent discipline in standards setting within the XBRL consortium, since the achievement in making XBRL is extraordinary.'

Peter Praet, Executive Director at the National Bank of Belgium (NBB), representing a smaller country with a long history in standardisation, stressed the importance of cooperation in the sector to reach standardisation. Praet: 'The receptiveness for standardisation is not well served with top-down or bottom-up approaches. The NBB chooses for cooperation with the market and is now implementing XBRL for various applications.' The NBB is introducing XBRL for banking supervisory reporting and found that investments and risks are very low. 'The international context is important for us. We work closely with surrounding countries and share a supervisory culture. Even if not all EU countries will adopt shortly, it is important for us to proceed.' The NBB is introducing XBRL in support of various reporting processes, including balance sheet data, tax and statistical information, affecting some 300.000 organisations.

Frederico Florez, IT Director at the Bank of Spain, illustrated the complexity of the reporting network surrounding a regulator such as the Bank of Spain. The resulting criteria for a supporting technology are also complex, and relate to business challenges, technical requirements and corporate image considerations. According to Mr. Florez, digital reporting and XBRL meet all of these requirements. The Bank of Spain is at this time executing projects to introduce XBRL for Credit Risk reporting, balance sheet data, balance of payments reporting and banking supervision. These projects will automate the reception of reports from some 500.000 agents, which is currently a manual task. 'All major banks in Spain are currently implementing XBRL and we are very proud of the success and added value of the Spanish XBRL jurisdiction which took the lead in developing the COREP taxonomy. We spent 4 months to build the COREP taxonomy and that is a great achievement. The COREP team started of with 50 people from 12 countries and is a truly multinational venture. As a result XBRL is and will be the only standard for business reporting we will use in Spain.'

The Deutche Bank AG, represented by Thomas Liesegang, Vice President CRM/Credit IT, recognizes XBRL as the ideal tool to facilitate data exchange with its 100.000 customers. For Credit Risk Management Deutsche Bank assembles some 180 facts from all of its customers out of the required balance sheet and income statement reporting. This information is now entered manually. The bank will not only realize considerable savings in efficiency of data entry, but also a large increase in the quality of the risk analysis. The credit risk analyst will have more data available to feed his analysis models and make his judgment. Data that was not captured before because it could not be assembled in an effective manner. XBRL is a crucial element to create a multi channel access system that integrates data streams from data providers, internal data gathering and analysis.

Walter Hamscher, Vice-Chair of the XBRL International Steering Committee, introduced some of the successful implementations of XBRL around the world. In Japan partners in the information supply chain worked together to streamline corporate filing processes for the benefit of reviving the Japanese economy. The UK Inland Revenue introduced XBRL to improve customer service by facilitating preparation of tax returns and filings. The US regulator Federal Deposit Insurance Corporation (FDIC) wanted real time data and save 27 million dollar and choose XBRL to achieve this. The Korean Stock Exchange wanted to attract foreign capital by making market information available in multiple languages; which was realised by applying XBRL and resulted in a doubling of foreign ownership with some of the quoted shares. The US Securities and Exchange Commission (SEC) seeks to increase transparency in the financial markets through XBRL, currently implemented as a voluntary filing program. Hamscher: 'What all these successful projects share with the current COREP project is a tangible goal: reduce the compliance burden on 8000 European banks. Also, this will give you as a multinational bank a ready to use common internal vocabulary. And as a smaller bank you may choose to remain where you are and report manually, or to use COREP and find that your regulator might lower your capital requirement.'

The leading Italian bank Gruppo Sanpaolo IMI, identified various benefits of XBRL to the quality of communication and several implementation areas. Its director Fransesco Canfora illustrates the issues created by inconsistencies between filings in central databases, such as that of the Centrale dei Bilanci, and the filings as published by companies. Implementing the standard in the banks infrastructure will solve efficiency issues in Credit Risk Management, quality and efficiency issues in reporting to various regulators and consistency issues in internal corporate reporting and consolidation. Canfora: We should carefully consider the level of integration of XBRL within our current information systems. There is a trade off between costs and benefits. However, even without major investments we will certainly see the benefits of XBRL in the speed of reporting and the quality of our analysis and communication with customers.'

Lucca Filippa, director Borsa Italiana, advocated that transparency in financial markets depends on timely, relevant and reliable information. 'Up to 2000 all communications between listed companies, the exchange and the investors and analysts was paper based. Listed companies required streamlining of internal en external dissemination of figures and they wanted to use one medium for many reporting duties. Since 200 we introduced pdf based electronic exchange of data. Now we have a freely accessible repository of information related to the issuers and their listing. However we want to increase transparency much further and do that without imposing a large burden on the issuers. That is why we are looking into XBRL. It will allow us to transition from document-centric to data-centric information provisioning at low costs for issuers. We aim to be among the first Italian adopters of XBRL. This year we will go live with a voluntary program for XBRL based communication with a selection of our issuers. It will provide more flexibility, reliability and timeliness and we will have evolved from paper based to data based reporting within 5 years.'

Bruno Tesnière, conference chair XBRL in Europe, Louis Matherne, President of XBRL International, and Kurt Ramin, Chairman of the XBRL International Steering Committee, explained what has been done to date to establish the standard and facilitate adoption. Tesnière: Tools, taxonomies, and vision are there; It's time for the banking community to implement!' According to Louis Matherne the focus is now on learning from earlier implementations and establishing best practices in taxonomy development and reporting. Jurisdictions play an important role in supporting members in adopting and using the standard.' Ramin entices the public to focus on three things only: 'Implement, implement and implement. IFRS and XBRL support and reinforce each other. XBRL supports all languages and provides automatic translation and can be used to facilitate IFRS deployment. There are different approaches to implementation. In The Netherlands and Denmark it's government driven. In Spain it is driven by the regulator Bank of Spain. In some countries it's driven by accountants. Whatever the model, it's worthwhile to use each others experiences.'

About XBRL

XBRL (eXtensible Business Reporting Language) is an open, Internet-based reporting standard that enables better, faster, and more cost-effective business reporting. Organisations can use XBRL to save costs and streamline their processes for collecting and reporting financial information. Consumers of financial data, including investors, analysts, financial institutions and regulators, can receive, find, compare and analyse data much more rapidly and efficiently when it is in XBRL format. XBRL can handle data in multiple languages and accounting standards. It can flexibly be adapted to meet different requirements and uses. Across Europe, many organisations are already using or implementing XBRL for their reporting purposes. These include: UK Inland Revenue, UK Financial Services Authority, Dutch Tax Authority and the Dutch government, German Bundesbank, Banco de España, EUROSTAT, National Bank of Belgium, and the Danish Commerce and Companies agency. The standard is supported by a global non-profit consortium with over 300 members.

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