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Implementing XBRL for a cross-border banking group in Europe. Giancarlo Pellizzari Head of Prudential Policy Dexia Group. Paris, June 22nd to 25th, 2009. Agenda . Implementing XBRL for a cross-border banking group in Europe. Agenda. Introduction. What does XBRL mean for Dexia? .

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implementing xbrl for a cross border banking group in europe

Implementing XBRL for a cross-border banking group in Europe

Giancarlo Pellizzari

Head of Prudential Policy

Dexia Group

Paris, June 22nd to 25th, 2009

agenda
Agenda
  • Implementing XBRL for a cross-border banking group in Europe

Agenda

Introduction

What does XBRL mean for Dexia?

Experiences

COmon REPorting

FINancial REPorting

IFRS Taxonomy

Conclusion

agenda1
Agenda
  • Implementing XBRL for a cross-border banking group in Europe

Introduction

Introduction

What does XBRL mean for Dexia?

Experiences

COmon REPorting

FINancial REPorting

IFRS Taxonomy

Conclusion

slide4

Introduction

  • Implementing XBRL for a cross-border banking group in Europe

What is Dexia ?

A group of approx. 250 entities, more than 28.000 staff members,

present in 37 countries (21 EU member countries)

slide5

Introduction

Implementing XBRL for a cross-border banking group in Europe

Our Environment

  • In terms of Reporting:
  • Public Reporting
        • Solo Financial Statements in local GAAP (or IFRS when allowed) and Conso Financial Statements in IFRS or local GAAP (Dexia Group using IFRS at consolidated level)
        • Pillar III (Basel II public reporting)
      • Regulatory Reporting
        • COREP
        • FINREP
        • Pillar II
        • MIFID
        • ECB Statistics
        • SEC filings
        • Other local GAAP reporting (Schema A, BAFI, etc.)
      • Other Reporting
        • Tax
        • Legal/social
introduction

BE

FR

LU

STATUTORY

CONSOLIDATED

CONSO

DHLD

SAP

Holding

INTERNAL

REPORTING

MAGNITUDE

COMMON PARAM

CONSO

DBB

CONSO

DCL

EXTERNAL

REPORTING

DBB

SPEC. LOCAL PARAM

CONSO

DBL

DCL

CHECK

CHECK

DBL

VISUAL

SCOPE

MIS CONSO

ESSBASE

Introduction

Implementing XBRL for a cross-border banking group in Europe

Our Environment

slide7

Introduction

  • Implementing XBRL for a cross-border banking group in Europe

Complexity?

Basel II IFRS Solvency II

Pillar I Pillar III IFRS 7 F/S Pillar III Pillar I

+ notes

Group Group Group Group BE (+group) BE

BE FR LU BE FR LU BE FR LU BE FR LU

slide8

Introduction

  • Implementing XBRL for a cross-border banking group in Europe

Complexity? (Example)

Maximum Credit Risk Exposure is referred to in Solvency II, Basel II and IFRS regulations.

Of course, as the regulations are different, a slight shift in the definition is present and leads to distortions of the presentation of the same concept in the different reports.

As highlighted on the next slide, the same information is requested in three different reporting. A complete reporting under XBRL could help providing an harmonized concept and avoid double or even triple entries for one information.

Furthermore, no precise and harmonized definition does exist, some reporting companies are considering full exposure, other “non-depreciated” exposure etc..

Above the problem of definition, another challenge is to comply with all the different interpretations for each country. Cross-border reporting turns out to be a real nightmare.

 Find a definition internally that may fit all regulations.

agenda2
Agenda
  • Implementing XBRL for a cross-border banking group in Europe

What does XBRL mean for Dexia?

Introduction

What does XBRL mean for Dexia?

Experiences

COmon REPorting

FINancial REPorting

IFRS Taxonomy

Conclusion

slide10

What does XBRL mean for Dexia ?

  • Implementing XBRL for a cross-border banking group in Europe

Why is XBRL interesting for a preparer?

  • Organizing the presentation of financial statements
    • True and fair view (Framework §46)
    • Respect of accounting standards use for preparation
    • and neutrality (Framework §36)

A good preparer must therefore compare regularly its financial statements with the ones of its peers (information to be obtained from Financial Communication department or analysts surveys), to be sure that its options are in line with the others

Therefore : benchmarking !

slide11

What does XBRL mean for Dexia ?

  • Implementing XBRL for a cross-border banking group in Europe

Why is XBRL interesting for an analyst?

Reviewing the financial statements

Base of presentation

Options selected in accounting standards

Valuation principles

Compare them with peers (Framework § 39)

Etc…

A good analyst must therefore compare regularly the Financial Statements, mainly the disclosures, presentation and valuation policies, to be sure that the financial statements are comparable

Therefore : benchmarking !

slide12

What does XBRL mean for Dexia ?

  • Implementing XBRL for a cross-border banking group in Europe

The Past

Dexia is active in XBRL since 2003...

WHY?

We saw the regulators’ attraction to XBRL because it was the right IT language to fit their needs in IFRS and Basel II reporting

XBRL was seen as a powerful tool for reducing administrative burden internally (Use XBRL as a tool for more harmonization, flexibility and gain of time both vertically and horizontally)

Importance of exchange of data in a cross border banking group (Internally and externally)

Importance of having one language with all regulators

slide13

What does XBRL mean for Dexia ?

  • Implementing XBRL for a cross-border banking group in Europe

The Present

Dexia is still active in XBRL:

Participation (as much as possible) in regulators’ discussions on XBRL

Participation in XBRL International conferences

Thierry Nederlandt, Head of Accounting and Consolidation (Dexia Group), member of the XBRL Advisory Council (XAC) of the IASC Foundation

Use of XBRL in various regulatory reporting in European countries:

COREP

FINREP

MIFID

Pillar II

Chosen for a flexible XBRL approach/tool (instead of a regulatory approach/tool) allowing easy internal and external developing capabilities

slide14

What does XBRL mean for Dexia ?

  • Implementing XBRL for a cross-border banking group in Europe

The Present

Staying up to date on the current evolutions permits the group to stay aware of the future requirements that will be applicable in the next steps of implementation of XBRL and to already prepare the staff and the processes in order to enter easily in action for each update;

Dexia also answers to draft papers and taxonomies from IASCF and other regulators to support the financial industry’s specificities and our vision.

Dexia is already adapting it’s IT infrastructure in order to benefit, internally, from the advantages of an harmonized system.

Fast close

Comparability (Internal & External)

Mutualization of knowledge

Internal managerial information

etc…

slide15

What does XBRL mean for Dexia ?

  • Implementing XBRL for a cross-border banking group in Europe

The Future

XBRL to be used by more and more financial reporting stakeholders:

Stock exchanges

Rating agencies

Other…

XBRL to become not only an external language of communication but also internal

Banks to create their own extensions or their own taxonomies?

Referring to the US where 12 different taxonomies are already in use; considering the specificities of the industry.

Or having particular extensions and dimensions to keep one single reporting line but also respecting industries specificities

agenda3
Agenda
  • Implementing XBRL for a cross-border banking group in Europe

Experiences

Introduction

What does XBRL mean for Dexia?

Experiences

COmon REPorting

FINancial REPorting

IFRS Taxonomy

Conclusion

agenda4
Agenda
  • Implementing XBRL for a cross-border banking group in Europe

COmon REPorting

Introduction

What does XBRL mean for Dexia?

Experiences

COmon REPorting

FINancial REPorting

IFRS Taxonomy

Conclusion

slide18

Each regulator has changed the EU base taxonomy (red box)

  • to fit with its needs, leading to several taxonomies and
  • huge costs for EU global banks
  • But CEBS has now committed
  • “to deliver EU-wide reporting
  • formats in 2012 for all credit
  • institutions and investment firms
  • located in the European Union”

Experiences : COREP

  • Implementing XBRL for a cross-border banking group in Europe

“Pure Regulatory” Reporting

COREP (COmmon REPorting – Pillar I reporting under Basel II framework), could become a real nightmare…

Starting from a single and unique European data model, regulators modified it to fit their own local needs

Some banks (locally active mostly) were also arguing for modifying the European model

Regulators also changed the definitions of concepts

Resulting for crossborder banks in a nightmare, where the same reporting element may be computed and reported in many different ways (12 COREP for Dexia)

But will be adjusted to a REAL COmon REPorting in 2012 (?)

MIFID and Pillar II

Reported in XBRL only in Belgium

To be adopted by other EU countries ?

slide19

Experiences : COREP

  • Implementing XBRL for a cross-border banking group in Europe

Regulatory failure: risk with future evolution

We need to be careful any proposed regulatory intervention itself does not lead to further regulatory failure. Two potential avenues for such regulatory failure are described below:

If the proposal sets harmonised requirements for information that is so high that compliance costs for firms are greater than benefits for the market as a whole; or

If the proposal requires a too low ceiling (key data are not collected, leading to net costs) regulators will be no longer able to identify some risks effectively, leading to an ineffective supervisory framework and, as a potential consequence, to a higher risk of financial instability.

Source: CEBS: Expert Group on financial Information, IA COREP May 5th, 2009

experiences corep
Experiences: COREP
  • Implementing XBRL for a cross-border banking group in Europe

COREP XBRL workflow

Sharepoint

Decentralised

(If not under XBRL)

Centralised

Fermat

CR worksheets

CR worksheets

CR worksheets

CA-MR-OR worksheets

XLS

XLS

XBRL tool

Local Soft

Assembling

Assembling

XBRL

Local format

CA-MR-OR worksheets

Other regulator

agenda5
Agenda
  • Implementing XBRL for a cross-border banking group in Europe

FINancial REPorting

Introduction

What does XBRL mean for Dexia?

Experiences

COmon REPorting

FINancial REPorting

IFRS Taxonomy

Conclusion

slide22

IFRS

taxonomy

FINREP

taxonomy

Pillar III

taxonomy

Dexia

taxonomy

Regulatory reporting

(FINREP & Pillar III)

Internal reporting

Public Financial

Statements

Experiences

  • Implementing XBRL for a cross-border banking group in Europe

Dexia’s different reportings

direct filling

Others

Tax

Other legal reporting (tax, statistical etc.)

SEC Proposes Roadmap Toward Global Accounting Standards to Help Investors Compare Financial Information More Easily

slide23

Experiences: FINREP

  • Implementing XBRL for a cross-border banking group in Europe

FINancial REPorting

FINREP (FINancial REPorting) regulatory reporting based on IFRS and having its own taxonomy

Same issue for FINREP than for COREP (but limited to specific parts)

FINREP taxonomy is based on the IASCF taxonomy

The link between both taxonomies to be stronger and stronger

Link between the FINREP and our Financial Statements

As per the examples that will follow, a large part of the required information is, if not similar, very close.

slide24

Experiences: FINREP

  • As such, we build up a comprehensive file with all the information required by all the regulators
  • No more need to input twice the same information
  • The information is always available for every reporting entity

These principles should be applied at all levels of consolidation

Implementing XBRL for a cross-border banking group in Europe

FINREP: Basic principle

“ The same information should be inserted only once “

slide25

Experiences: FINREP

Implementing XBRL for a cross-border banking group in Europe

FINREP: Basic principle

Counterparties

Mapping of the reportings and related ECB comments

slide26

Experiences: FINREP

e.g. “public sector”

"Non-commercial administrative bodies responsible to central governments, regional governments or local authorities, or authorities that in the view of the competent authorities exercise the same responsibilities as regional and local authorities, or non-commercial undertakings owned by central governments that have explicit guarantee arrangements, and may include self administered bodies governed by law that are under public supervision". Art 4 (18) of the CRD.

Implementing XBRL for a cross-border banking group in Europe

FINREP: Basic principle

Common definitions

Used for different reporting in different states like COREP and FINREP in Luxembourg and Belgium

Like the Equity instruments Including statistical impairment in FINREP but not in COREP, currently too much discrepancies and different definitions. Need for harmonization.

slide27

Experiences: FINREP

Links with FINREP (and F/S)

Implementing XBRL for a cross-border banking group in Europe

Example

experiences finrep
Experiences: FINREP

 Links with F/S (and FINREP), partly provided by RMG

Implementing XBRL for a cross-border banking group in Europe

Example

experiences finrep1
Experiences: FINREP

Implementing XBRL for a cross-border banking group in Europe

Example B/S

 CEBS B/S

 CB B/S

slide30

Experiences: FINREP

  • CSSF B/S

Implementing XBRL for a cross-border banking group in Europe

Example B/S

slide31

Experiences: FINREP

  • CBFA B/S

Implementing XBRL for a cross-border banking group in Europe

Example B/S

experiences finrep2
Experiences: FINREP
  •  link from F/S to FINREP

Implementing XBRL for a cross-border banking group in Europe

Example B/S

slide33

Experiences: FINREP

  • DEXIA’S B/S : link with magnitude accounts

Implementing XBRL for a cross-border banking group in Europe

Example B/S

slide34

Experiences: FINREP

  • Example 2: additional detail

Implementing XBRL for a cross-border banking group in Europe

Example B/S

slide35

Benchmarking !

Experiences: FINREP

  • Implementing XBRL for a cross-border banking group in Europe

Comments on the discussion paper

Discussion paper “Financial Statements Presentation”

Not very suitable for the banking industry, like most of the IFRS, very oriented towards industrial companies.

Should be more oriented towards a multi-tier service instead of only investor oriented.

Very positive to impose a rigid classification as it improves comparability but this classification should reflect the realities of the different industries.

We do not support presenting cash flows for the banking industry as it won’t add any value.

We do believe that the use of a global standard like XBRL could reflect the specificities of our industry and furthermore increase comparability between and inside the different industries.

We believe that the use of extensions and dimensions in XBRL will provide both the structure and the flexibility asked by the stakeholders.

slide36

Experiences: FINREP

Implementing XBRL for a cross-border banking group in Europe

FINREP Challenges

Link with IFRS and banks’ financial statements

  • National discretions:
    • CEBS guidelines not always clear
    • CEBS guidelines not always respected by member states
    • Changes in the “business format” may have insidious impact on the taxonomy (deleting a line changes the definition of the total – unless “among which”)
    • Additional information inconsistent with the CEBS format
    • Sometimes, regulators may give interpretations to IFRS rules
  • Dimensions:
    • Preferred instead of tuples (link with IASCF?)
    • More standardization may be a benefit (exhaustive list of flows used throughout FINREP)
    • Definitions of some dimensions (counterparties => links with COREP, ECB, etc.)
slide37

Experiences: FINREP

  • Implementing XBRL for a cross-border banking group in Europe

The Future: Using Dimensions ?

As per our chart of accounts, clearly related

agenda6
Agenda
  • Implementing XBRL for a cross-border banking group in Europe

IFRS Taxonomy

Introduction

What does XBRL mean for Dexia?

Experiences

COmon REPorting

FINancial REPorting

IFRS Taxonomy

Conclusion

slide39

IFRS Taxonomy

Implementing XBRL for a cross-border banking group in Europe

Main Structure of the IFRS taxonomy

The Taxonomy is following rule by rule the IFRS requirements

Ease to find an item and the related disclosures

No problem to find out relative examples or description rules

Clear follow up of the updates of the regulation. No difficulties to highlights impacts of IFRS changes

slide40

IFRS Taxonomy

Implementing XBRL for a cross-border banking group in Europe

IT viewpoint of the XBRL taxonomy

ifrs taxonomy
IFRS Taxonomy

Implementing XBRL for a cross-border banking group in Europe

Table Presentation of the taxonomy

slide42

IFRS taxonomy

  • Implementing XBRL for a cross-border banking group in Europe

Summary of the main comments relating to IFRS taxonomy

The issue of versioning has been raised by number of respondents

Proposition to add formal descriptions of the concepts in order to avoid misunderstandings or divergent interpretations.

Propositions to add extensions relating only to some industries or to propose different taxonomies for the different industries.

Proposition to extend examples to all the possible situations, could be through dimensions, to allow other examples than the ones proposed by the IFRS wording. (Not all the reporting companies have biological assets…)

Need to follow more the detail level required by the standards and the common practice.

Need to translate the choices left to the reporting entities in the taxonomy (example: either in the notes or in the PFS)

The use of the concept of “dimension” could help structure the information provided facilitating even more the understanding and the use of the provided information.

agenda7
Agenda
  • Implementing XBRL for a cross-border banking group in Europe

Conclusion

Introduction

What does XBRL mean for Dexia?

Experiences

COmon REPorting

FINancial REPorting

IFRS Taxonomy

Conclusion

slide44

IFRS Taxonomy

  • Implementing XBRL for a cross-border banking group in Europe

How does it work ?

Data sources

XBRL tool

Accounting

MAPPING

Risk

xls VALIDATION

Tax

XBRL conversion

Others

experiences corep1
Experiences : COREP
  • Implementing XBRL for a cross-border banking group in Europe

Feedback

On the softwares (XBRL focused) :

Flexible enough to be adapted to all taxonomies

To be adapted on a international banking IT structure

Mapping is still the key

Additional taxonomies can be quickly added

On the taxonomies :

Advantages of XBRL aren’t used

Basis taxonomies are modified by local regulators

A unique EU taxonomy is necessary

XBRL is not mature enough to be internally used

slide46

Conclusion

  • Implementing XBRL for a cross-border banking group in Europe

Launch of the XBRL reporting

Detail of problems faced by a transnational bank implementing XBRL

Different systems

People are reluctant to change

Information retention instead of global info sharing (protectionism attitude due, partly, to the crisis)

Risk of national protectionism from the different branches

Risk of additional national requirements => no additional requirements should be accepted, the member states should be ready to accept “as is” taxonomy as it is perfectly in line with IFRS requirements (and those should be accepted anywhere)

slide47

Experiences: FINREP

Implementing XBRL for a cross-border banking group in Europe

slide48

Conclusion

  • Implementing XBRL for a cross-border banking group in Europe

It’s just started but already running…

Taxonomies need to be managed in an harmonized way i.e.

Development of extensions has to be consistent with the “parent taxonomy”

Need for Best Practices

But

XBRL standards are now strong enough to be industrialized

More and more authorities are adopting XBRL, it is becoming the standard

XBRL offers a great opportunity to complete the work done by the IASB and the IFRIC on IFRS principles, as now XBRL may help to better compare information coming from different companies

Furthermore, the use of XBRL does not require huge investments as most of the software are open-source

slide49
Implementing XBRL for a cross-border banking group in Europe

Questions ?

THANKS FOR YOUR ATTENTION

Contacts

Giancarlo Pellizzari

Head of Prudential Policy

+32 22 13 50 49

giancarlo.pellizzari@dexia.com

implementing xbrl for a cross border banking group in europe1

Implementing XBRL for a cross-border banking group in Europe

Giancarlo Pellizzari

Head of Prudential Policy

Dexia Group

Paris, June 22nd to 25th, 2009