12 th XBRL International Conference Leveraging XBRL on
12 th XBRL International Conference Leveraging XBRL on Banking Supervision Ignacio Boixo COREP. XBRL Project Coordinator XBRL Spain. Manager Tokyo, 2005 -11 -08
Agenda 1. Basel II * 2. COREP: European Basel II 3. Dimensional extensibility** 4. Implementing XBRL Banking Supervision 5. Challenges in leveraging XBRL * Acknowledgement to Frédéric Marié ** Acknowledgement to Katrin Schmehl & Panagiotis Voulgaris 2
Structure of the New Basel II Accord Three Pillars I – Capital requirements Risk weighted assets Credit risk Standardised Approach Operational risk Internal Ratings-based Approach 3 II - Supervisory review process Definition of capital Market risks III - Market discipline
Pillar I: Minimum Capital Requirements Regulatory Capital Credit Risk Revised Standardized Approach or Foundation IRBA or Advanced IRBA ≥ 8% Market Risk Standardized Approach or Internal Models Approach +Operational risk Basic Indicator Approach or Standardized Approach or Advanced Measurement A. 4 Capital Adequacy Framework Evolution of the most well-known Basel I requirement in minimum capital standard or Cooke Ratio Own funds Lendings ≥ 8%
2. Operational Risk Credit, operational and market risks: Evolutionary path and capital incentives to move to the most advanced approach Increasing management standard Standardised Foundation IRB Approach Advanced IRB Approach Basic Indicator. The Standardised Approach (BIA) Approach (TSA) Standardised Approach Credit risk modelling ? Advanced Measurement Approach (AMA) Internal Models Approach Increasing capital charges 5
Pillar II: Supervisory Review Process Pillar 2 is intended : § to achieve a level of capital commensurate with a bank’s overall risk profile § to encourage banks to develop and use better risk management techniques in monitoring and managing their risks 6
Pillar III: Market Discipline § Pillar 3 is intended to provide investors with reliable and timely information to understand a bank’s risk profile § Enhance role of market participants in encouraging banks to hold adequate levels of capital § Pre-condition for the use of some methodologies (Internal ratings-based approaches, AMA) § Qualitative and quantitative disclosures (information on methodology and key inputs, e. g. explanation of structure of internal rating system and PD, LGD assumptions, …) 7
COREP Defining a COmmon REPorting framework around the solvency ratio for credit institutions and investment firms (Basel II) under the European Union Capital Requirements. Based on the proposal for the Recasted European Directives 2000/12/CE and 93/6/EEC released in July 2004 Under the Authority of the Committee of European Banking Supervisors www. c-ebs. org 8
COREP concept: extension COREP Future templates? COREP Templates Today Pillar II Supervision Pillar I Capital Pillar III Market 9 vs. Pillars
3 • COREP: Flexibility Principle Basel II European Law 9 X, XX% Basel II compatible Directives 2000/12 & 93/6 Country 1 Country 2 Country 3 Transposition into national Legislation Country 25 National Regulation FSA 1 FSA 2 FSA 3 FSA 25 National Implementation Report 1 ----------------- Report 2 Report 3 Report 25 ------------------------------------------------------------------------------------------------------------------------------------------------------------- 10 XBRL challenge!
COREP Goals Objectives è A new ratio = a new challenge & new opportunity è Reduce the regulatory reporting burden for International Groups è A better co-operation between Supervisors Principles è Objectives & Principles è Flexibility è Consistency è Standardization 11
3 • COREP: Flexibility Principle èFlexibility 3 levels of flexibility (A, B & C) COREP D 1 C 1 B 3 B 2 D 2 A D 3 D 4 B 1 C 2 C 3 C 4 Reporting CAD III 12 A: data needed by all Supervisors. B: specific to a country or a group of countries but integrated in the dictionary of common data. C: data specific to a country or sector (leasing…). To be integrated when possible. D: data outside COREP (credit register…)
COREP concept: extension COREP superset of reports Custom report Sreport mall Medium Large report Depending on the national requirements each country will determine a framework and a level of detail. 13
COREP concept: template Template: Dimension 2 Dimension 1 Measure Dimension 3 Dimension 4 14 Measure
COREP concept: Data Matrix All the dimensions are optional! EXPOSURE TYPES EXPOSURE CLASSES STANDARD APPROACH CAPITAL REQUIREMENTS 15
COREP taxonomy customisation requirements § COREP defines a superset of possible reporting items. § Each country has the right to choose the level of detail. § The COREP framework must be highly flexible and extensible. § To meet this goal the framework is as modular as possible. . i m p o r t s . dimension . XSD measures. XSD 16 template. XSD
Customisation of Labels: I German labels English labels § meaningful names of the items to be reported § are used in reports to hide the technical name 17
Customisation of Labels: II § Each country defines its own dictionary in its national extension taxonomies. § The measure and dimension items can refer to several translations. <GOLD id=“m-fr-gr_Gold”> National labels 18 technical name
Customisation of References § Each COREP reporting item refers to where it is derived from: the EU directive for Basel II. § References to the national law can be added. ORIGINAL CREDIT & COUNTERPARTY RISK EXPOSURE… 19
Customisation of the template structure Possible changes: § Adding or removing columns and rows § Reordering the hierarchical structure § Restrict cells from being reported § Provide choices between dimensions § Remove dimensions from the template 20
Adding or removing columns and rows I COREP FIRB National FIRB A B C Column B has to be removed. 21 A C D Column D has to be added.
Adding or removing columns and rows II COREP taxonomy structure § The hierarchical structure of the FIRB template has been changed. A B C § Column B is no longer allowed in the national taxonomy. National taxonomy structure A § Column D has been added to the national taxonomy. C D 22
Reordering the hierarchical structure: I § New items can be positioned as necessary in the national template structure. § Existing items can be reordered if required. § Thus every country can personalise the presentation of its templates. A D C Columns C and D have been exchanged. 23
Reordering the hierarchical structure: II Structure before reordering: A C D New structure: A D C 24
Restrict cells from being reported: I § Every cell is a combination of a measure and its dimensions. § Some row/column combinations are not valid inside the EU directive of Basel II and must not be reported. They are marked in grey inside the COREP templates. § National taxonomies can override those restrictions. D 2 M M: Measure D 1: Dimension 1 D 2: Dimension 2 X D 1 25
Restrict cells from being reported: II Measures M excludes Mn includes Exposure Class Dimension D 1 D 2 D 1 Dn includes Exposure Type Dimension 26 D 2 Dn
Restrict cells from being reported: III § Restricted cells can be grouped together, i. e. several cells in one column. § Inside the taxonomy they are added in a container that holds all the invalid dimensions. § The container can be reused for other measures of the template. M 1 D 1 excludes D 2 D 3 M 2 D 4 excludes 27 Container that holds a dimension group.
Provide choices among dimensions: I § For this template either Dimension 2 or Dimension 3 can be used. choice D 1 28 D 2 D 3
Provide choices among dimensions: II § If a banking supervisor decides that one of two or more possible dimensions has to be used for a national COREP template, it can define this choice inside the template taxonomy. Template measures either Dimension A choice or includes Dimension B Dimension C 29 Either Dimension A or Dimension B has to be used in the template.
Remove dimensions from the template: I § The national banking supervisor decides that a dimension is not needed in a template. 30
Remove dimensions from the template: II § The national taxonomy can be created to reflect this requirement by removing the connection between the measures of the template and the dimension that is not needed. Template measures includes Dimension A includes Dimension B 31 Dimension B is no longer allowed.
COREP implementation: Model Bank Supervisor Taxonomy XBRL Errors Internet Risk Management INDUSTRY to XBRL Operations Counterparties Collateral … Supervision from XBRL Report XBRL --------------- 32 Reports Other data …
COREP implementation: Model Didactic model for explanatory purposes only Basel II XBRL implementation COREP XBRL (National) Basel II COREP XBRL (Europe) Bank Supervisor Internet Bank operations, controls…. Presentation, Analysis… Errors Risk Management IS Supervisory Basel II App. Operations Counterparties Collateral … to XBRL from XBRL Report -------------- Report XBRL core -------------- File Transfer (National) 33 Basel II App. Reports Other data … …
COREP implementation: Banks XBRL Reports Bank 1 Multiple implementation approaches: • Small banks may use Application Service Provider -ASP- model, outsourcing technical complexity • Banks may report all to all the Supervisors: Basel II & IFRS, Banking & Stock Exchange… • International Banks may reduce supervisory burden when reporting to different countries Bank 2 Bank 3 ASP provider Basel II Bank n Banking Supervisor IFRS International Bank Stock Ex. Supervisor Country Z Supervisor 34
COREP project: Acknowledgments (kick-off workshop, February 2005) Name Adrian Abbott Alejandro Sanz Aliki Kazakopoulo Annica Lundblad Antonio Menchero Antonio Sánchez-Serrano Arturo Labanda Bryce Pippert César Pérez-Chirinos Charles Hoffman Cormac Mc. Kenna Cristina Mena Daniel D'Amico Daniel Hamm David Castro Delphine Moreau Dennis Pels Don Inscoe Emilio Querol Fernando Navarrete Fernando Wagener Francesco Canfora Francisco Flores Frédéric Marié Gustavo Garcia Country UK ES GR SE ES ES ES USA IE ES UK DE ES FR NL USA ES ES ES IT ES FR ES Affiliation FSA Infodesa NCB Pw. C Soft. AG NCB Pw. C UBmatrix NCB UBmatrix Fujitsu inorme XBRL NCB Azertia NCB FSA Pw. C NCB Bank Scholar NCB IBM 35 Name Ignacio Boixo Ignacio Hernández-Ros J. Emilio Labra Javier Cobo Javier de Andres Jean-Marie Coudière Jesus F. Liger Johan Giertz José Luis F. Cuñado Josef Macdonald Katrin Schmehl Klaus Baumann Krisztina Tamási Magdalena Llano Michele Romanelli Olivier Servais Pablo Navarro Pamela Maggiori Panagiotis Voulgaris Paolo Milani Pedro Lorca Phil Walenga Ron Baremans Victoria Santillana Walter Hamscher Country ES ES ES FR ES SE ES UK DE DE HU ES IT BE ES IT GR IT ES USA NL ES USA Affiliation NCB XBRL Prof. Dr. Fujitsu Prof. Dr. NCB Azertia Bank Infodesa IASB NCB FSA XBRL NCB XBRL Soft. AG NCB NCB Prof. Dr. UBmatrix NCB AFI XBRL
Opportunity window 2002 2003 2004 2005 2006 2007 2008 Too late Today! Too early Establishing: CEBS XBRL EU • • • 36 Operational: Basel II IFRS/IAS • • •
COREP Next steps: Releases Steering Committee 05 -06 -03 Dimensions: Public draft 05 -07 -19 Vendors involvement European Workshop Dimensions: Approved COREP: Published 05 -08 -26 05 -09 -15 05 -11 -07 1 Q 2005 Release 0. 6 Release 0. 7 Release 1. 0 37
Basel II: Bottom up approach Basel II Int’l Accord Defined into XBRL terms Int’l XBRL taxonomy Country 1 Country 2 Country 3 Global consolidation Country n National Jurisdiction FSA 1 FSA 2 FSA n FSA 3 National Implementation Report 1 ----------------- Report 2 Report 3 Report 25 ------------------------------------------------------------------------------------------------------------------------------------------------------------- 38 ! Real XBRL implementations
COREP Next steps: Options Challenge The real challenge is not the initial design of the taxonomy; a group of enthusiastic people is ready to carry out this job, as it has been demonstrated. The real challenge is real the XBRL implementation The long term challenge is building XBRL Banking Supervision in a bottom up approach 39
Thanks - Obrigado - Merci - Gracias Danke - Grazie - Ευχαριστίες - Спасибо Pieter Bruegel The Tower of Babel. 1563 40
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