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12 th XBRL International Conference. Leveraging XBRL on Banking Supervision. Ignacio Boixo COREP. XBRL Project Coordinator XBRL Spain. Manager. Tokyo, 2005-11-08. Agenda. Basel II * COREP: European Basel II Dimensional extensibility** Implementing XBRL Banking Supervision

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leveraging xbrl on banking supervision

12th XBRL International Conference

Leveraging XBRL on Banking Supervision

Ignacio Boixo

COREP. XBRL Project Coordinator

XBRL Spain. Manager

Tokyo, 2005-11-08

agenda
Agenda
  • Basel II *
  • COREP: European Basel II
  • Dimensional extensibility**
  • Implementing XBRL Banking Supervision
  • Challenges in leveraging XBRL

* Acknowledgement to Frédéric Marié

** Acknowledgement to Katrin Schmehl & Panagiotis Voulgaris

pillar i minimum capital requirements
Pillar I: Minimum Capital Requirements

Regulatory Capital

≥ 8%

  • Capital Adequacy Framework
  • Evolution of the most well-known Basel I requirement in minimum capital standard or Cooke Ratio

Credit Risk

Market Risk

Standardized Approach

or

Revised Standardized Approach

Internal Models Approach

+

or

Operational risk

Foundation IRBA

Own funds

Basic Indicator Approach

≥ 8%

or

or

Lendings

Standardized Approach

Advanced IRBA

or

Advanced Measurement A.

slide5

2 . Operational Risk

  • Credit, operational and market risks: Evolutionary path and capital incentives to move to the most advanced approach

Increasing management standard

Standardised

Approach

Foundation IRB

Approach

Advanced IRB

Approach

Credit risk

modelling ?

Basic Indicator

Approach (BIA)

The Standardised

Approach (TSA)

Advanced

Measurement

Approach (AMA)

Standardised

Approach

Internal Models

Approach

Increasing capital charges

pillar ii supervisory review process
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
pillar iii market discipline
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,…)
corep
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
corep concept extension
COREP concept: extension

COREP

vs. Pillars

Future templates?

Pillar I

Capital

COREP Templates

Today

Pillar I

Capital

Pillar II

Supervision

Pillar III

Market

slide10

Report 25

----------------------------------------------------------------------------------------------------------------------------------------------------------------

3 • COREP: Flexibility Principle

Basel II

European Law

9X,XX% Basel II compatible

Directives 2000/12 & 93/6

Transposition into

national Legislation

Country 1

Country 2

Country 3

Country 25

National Regulation

FSA 1

FSA 2

FSA 3

FSA 25

National Implementation

Report 1

------------------------------------

Report 2

Report 3

----------------------------------------------------------------------------------------------------------------------------------------------------------------

XBRL challenge!

corep goals
COREP Goals
  • Objectives & Principles
  • A new ratio = a new challenge & new opportunity
  • Reduce the regulatory reporting burden for International Groups
  • A better co-operation between Supervisors

Objectives

Principles

  • Flexibility
  • Consistency
  • Standardization
slide12

D1

C1

B 3

B 2

D2

C2

A

D3

C3

D4

C4

B 1

Reporting CAD III

3 • COREP: Flexibility Principle

è Flexibility

3 levels of flexibility (A, B & C)

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

corep concept extension13
COREP concept: extension
  • Depending on the national requirements each country will determine a framework and a level of detail.

COREP superset of reports

Large

report

Custom

report

Medium

report

Small

report

corep concept template
COREP concept: template

Template:

Dimension 2

Dimension 1

Measure

Measure

Measure

Measure

Dimension 3

Dimension 4

corep concept data matrix

EXPOSURE TYPES

EXPOSURE CLASSES

STANDARD APPROACH

CAPITAL REQUIREMENTS

COREP concept: Data Matrix

All the dimensions are optional!

corep taxonomy customisation requirements

imports

.

.

dimension.XSD

template.XSD

measures.XSD

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.
customisation of labels i
Customisation of Labels: I
  • meaningful names of the items to be reported
  • are used in reports to hide the technical name

German labels

English labels

customisation of labels ii
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”> technical name

National labels

customisation of references
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…

customisation of the template structure
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
adding or removing columns and rows i
Adding or removing columns and rows I

COREP FIRB

National FIRB

D

A

B

C

A

C

Column D has to be added.

Column B has to be removed.

adding or removing columns and rows ii

A

C

D

Adding or removing columns and rows II

COREP taxonomy structure

  • The hierarchical structure of the FIRB template has been changed.
  • Column B is no longer allowed in the national taxonomy.
  • Column D has been added to the national taxonomy.

A

B

C

National taxonomy structure

reordering the hierarchical structure i
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.

C

A

D

Columns C and D have been exchanged.

reordering the hierarchical structure ii

A

C

D

A

D

C

Reordering the hierarchical structure: II

Structure before reordering:

New structure:

restrict cells from being reported i
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.

D2

M

M: Measure

D1: Dimension 1

D2: Dimension 2

D1

X

restrict cells from being reported ii
Restrict cells from being reported: II

Measures

M

Mn

excludes

Exposure Class

Dimension

D1

includes

D2

D1

Dn

Exposure Type

Dimension

includes

D2

Dn

restrict cells from being reported iii
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.

M1

D1

Container that holds

a dimension group.

excludes

D2

D3

M2

D4

excludes

provide choices among dimensions i
Provide choices among dimensions: I
  • For this template either Dimension 2 or Dimension 3 can be used.

D2

choice

D3

D1

provide choices among dimensions ii
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

Dimension A

either

Either Dimension A or Dimension B has to be used in the template.

choice

Dimension B

or

includes

Dimension C

remove dimensions from the template i
Remove dimensions from the template: I
  • The national banking supervisor decides that a dimension is not needed in a template.
remove dimensions from the template ii
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

Dimension A

includes

includes

Dimension B is no longer allowed.

Dimension B

corep implementation model

Supervision

Reports

Other data

COREP implementation: Model

Bank

Supervisor

Taxonomy XBRL

Errors

INDUSTRY

Internet

Risk Management

to XBRL

from

XBRL

Operations

Counterparties

Collateral

Report

XBRL

------------------------------

corep implementation model33

Risk Management

IS Supervisory

Operations

Counterparties

Collateral

Reports

Other data

COREP implementation: Model

Didactic model for explanatory purposes only

Basel II

Basel II

XBRL implementation

COREP XBRL (National)

COREP XBRL (Europe)

Bank

Supervisor

Internet

Bank operations, controls….

Presentation, Analysis…

Errors

Errors

Basel II

App.

Basel II

App.

to XBRL

from XBRL

Report

------------------------------

Report

------------------------------

XBRL core

File Transfer (National)

corep implementation banks
COREP implementation: Banks

XBRL Reports

  • 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 1

Bank 2

Bank 3

ASP provider

Bank n

Basel II

Banking Supervisor

IFRS

International Bank

Stock Ex. Supervisor

Country Z Supervisor

opportunity window
Opportunity window

2002

2003

2004

2005

2006

2007

2008

Too late

  • Operational:
    • Basel II
    • IFRS/IAS
    • •••

Today!

Too early

  • Establishing:
    • CEBS
    • XBRL EU
    • •••
corep next steps releases
COREP Next steps: Releases

Steering Committee

Dimensions: Public draft

Vendors involvement

European Workshop

Dimensions: Approved

COREP: Published

05-06-03

05-07-19

05-08-26

05-09-15

05-11-07

1Q 2005

Release 0.5

Release 0.6

Release 0.7

Release 1.0

slide38

Report 25

----------------------------------------------------------------------------------------------------------------------------------------------------------------

Basel II: Bottom up approach

Basel II

Int’l Accord

Defined into XBRL terms

Int’l XBRL taxonomy

Global consolidation

Country n

Country 1

Country 2

Country 3

National Jurisdiction

FSA n

FSA 1

FSA 2

FSA 3

National Implementation

Report 1

------------------------------------

Report 2

Report 3

----------------------------------------------------------------------------------------------------------------------------------------------------------------

!

Real XBRL

implementations

corep next steps options
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
thanks obrigado merci gracias danke grazie
Thanks - Obrigado - Merci - Gracias Danke - Grazie - Ευχαριστίες - Спасибо

Pieter Bruegel

The Tower of Babel. 1563

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