Driving ROI through financial reporting
Jason McCreight, Deloitte
Outline
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
Introduction
Regulatory landscape for banks
XBRL
XBRL and Multidimensionality
Data Point Models and Dimensions
Standardised Reporting
Multidimensionality in Regulatory Reporting
Implications For Banks
Benefits Beyond Compliance
Summary
1. Introduction
A coming of age for regulatory reporting
CRDIV proposes a
number of measures to
raise the quality,
consistency and
transparency of banks’
capital.
XBRL submission of
COREP and FINREP
data will be mandatory:
Q1 2014
XBRL is rapidly gaining
acceptance as a standard
global framework to
support the more effective
production, consumption
and exchange of financial
information.
2. Regulatory landscape for banks
A recap of the past five years
2007
…
2011
2012
Basel I & II
(CRD, II, III)
2013
2014
Basel III
(CRDIV)
European
Directives
2015
…
2020
Basel III
(CRDIV)
CRD IV
(European BASEL III
adaptation)
EBA
Financial
Supervision
Manual EUC &
paper reporting
(European Supervisory Authority)
Banking
(National Supervisory Authority)
Reporting
Obligations
COREP
FINREP
Automated
“eRegulation” &
XBRL
2. Regulatory landscape for banks
“Navigating the Compliance Labyrinth”: A Deloitte
Publication
of respondents agreed strongly
that compliance with
regulatory requirements will
become more challenging in
the next 3-5 years
90%
of respondents agreed strongly that
compliance with regulatory
requirements had become more
challenging over the last five years
95%
159%
Deloitte Centre for Banking Institutions:
20 of largest 50 US banks by assets
http://www.finextra.com/finextradownloads/newsdocs/Deloittecompliance.pdf
increase in
expenditure on
compliance
3. XBRL
The basics
What is XBRL?
•A language for the electronic communication of business and financial data revolutionising business reporting
•XBRL’s impact on financial reporting and data exchange has been compared to the impact of bar-coding on
merchandising
Why is it being adopted?
•Mandated part of how financial organisations will have to submit automated prudential reports in the fourth
iteration of the Capital Requirements directive (CRDIV)
•Standards-based method allowing more efficient preparation, publishing, exchange, and analysis of
regulatory financial data
When will it become mandatory?
•COREP and FINREP submissions must be made in XBRL
•Banks should expect a global adoption of XBRL from Q1 2014 onwards
Who benefits?
•The cost savings stemming from greater efficiency and improved accuracy & reliability can be realised by all
those involved in supplying or using financial data
•The capabilities of the regulator to analyse and compare financial data will be dramatically enhanced.
•Greater market efficiencies can be realised across global capital markets
•Investors are allowed an “apples for apples” perspective when comparing financial information
•Streamlining financial reporting processes can eliminate divergent systems within businesses, thus reducing
costs
3. XBRL
A global standard for business reporting
“Tags” enable
automated processing
of business information
by computer software,
allowing the data to be
treated “intelligently”.
Shows how items are
related to each other,
thus representing how
they are calculated.
Powerful and flexible,
specifically designed to
meet the requirements
of financial information.
XBRL
Local banks
XBRL
National
Supervisory
Authority
Identifies whether data
fall into particular
groupings for
organisational or
presentational
purposes.
XBRL mandated
by EBA
European
Banking
Authority
4. XBRL and multidimensionality
•
A multidimensional database (MDB) is often called a “cube”. This is
a dramatic simplification as they can often have many more than the
3 dimensions that this visually represents
•
It is a database optimised for analysis
•
These databases can rapidly process data so that answers can be
found quickly
•
The data elements in the COREP reporting templates have been
converted to a highly structured multi-dimensional data model
•
NSAs and banks can use the Data Point model to structure the
design and processing of their internal reporting processes end
systems.
DPM Approach
Traditional Approach
DPM
Bank
NSA
Requires manual interpretation and re-keying of data
Bank
NSA
DPM approach allows both banks and NSAs to align their
systems to the data definitions
5. Data Point Models and Dimensions
Examples
Data point model
Dimension
6. Standardised Reporting
Regulator
Regulator
XBRL
Solution 1
Solution 2
Solution 3
Solution 1
Solution 2
Solution 3
Bank X
Bank Y
Bank Z
Bank X
Bank Y
Bank Z
•
XBRL’s impact on financial reporting and data exchange has been compared to the
impact of barcodes on merchandising
•
Like the barcode, XBRL is a system for coding and decoding information:
i.
Multiple forms of information consolidated into a single, standards-based format
ii.
A single piece of financial data is multidimensional
7. Multidimensionality in Regulatory Reporting
CRDIV XBRL as a transition mechanism
•
Multidimensional data is very rich and powerful
•
In an ideal world a Regulator could provide an MDB & ask it to be populated. However
numerous software companies provide solutions
•
It is this link that businesses can leverage to enhance other internal and external reporting
and go “on the offensive”, whilst simultaneously adhering to regulatory standards
Standardised Transmission of data
between Banks & Regulators
BANKS
REGULATORY CUBE
XBRL
REGULATORY
8. Implications For Banks
Regulators will have
far more power and
control over data in
coming years, given
the flexibility of the
new XBRL reporting
process.
CRDIV will be an
evolutionary process
and will require time
for the standards to
stabilise and become
clear.
Domestic and foreign
banking institutions
should expect
tougher oversight and
enforcement of
regulatory
compliance, beyond
COREP and FINREP.
“Apples to
Apples”
Comparability
Banks should expect
to further investment
requirements in 2014
and beyond.
Regulator
Power,
Control &
Insight
Investor
demands for
high quality
information
Response to
change
9. Benefits Beyond Compliance
Value-add effort maximisation
Standards-based
Extensible
Automated
Reliable
Transparent
Convergent
XBRL
Consistent
10. Summary
•
•
•
•
•
•
•
XBRL is a data transmission mechanism.
However it is different to many of its predecessors as it allows the
richness of multidimensionality to be built in & retained
This kind of technology is quite new – it has been around for 20 years
It has been adopted & used consistently in Finance functions; handling
results consolidation & publication, planning & analytics
Today’s principle point was that it can also be used more in the
Regulatory area.
Wider use should help to produce and analyse accurate data more
efficiently
It can be used both by the banks & the regulators to drive greater
compliance but should also produce benefits beyond this