Transcript Taxonomies for Transparency: Five principles for

Taxonomies for
Transparency:
Five principles for regulatory efficiency and effectiveness
of XBRL deployment in Europe
Laurent Collet ([email protected])
European Leader, Financial Services XBRL
Director, PricewaterhouseCoopers
Challenges of Regulatory Reporting
• New European regulation framework :
– EU Directives (Transparency, Prospectus, UCITS 3, Market
Abuse, Financial reporting IFRS)
– Basel II / Credit risks
• The new regulation changes in addition of a non-optimal current
reporting flow is a real concern within the financial services industry
• Industry will have to move towards new innovative solutions to
overcome bottlenecks and meet new EU directives
Overcoming today’s challenges
Supervisor
Investors
Central Bank
Analysts
Regulated
entities
N times same
information sent to N
entities
Government
(Tax agencies)
Stock Exchanges
Internal
Corporate Reporting
Consistency of the information ?
Data
Vendors
Auditors
Risks
Mngt.
Consistency
of the
information ?
Overcoming future challenges
• Enhance supervisory cooperation in Europe
$
Bank
Supervisor
$
Bank
Supervisor
$
• Promote information exchange
between supervisory
authorities (all sectors)
$
Bank
Supervisor
$
Bank
Supervisor
$
Bank
Supervisor
$
Bank
Supervisor
Bank
Supervisor
$
$
Bank
Supervisor
Bank
Supervisor
• Provide financial information to
all supply chain members in an
open and transparent manner
• Set up a common framework
and standard for the collect
and publication of the financial
information
Five Principles for achieving efficiency
key building blocks for transitioning
to a content-driven automated information
Structured
filings
Shared
Vocabularies
Uniform
validations
Diverse
e-filing
methods
Clear-cut
transitions
Leveraging structured filings
Let the software do the ‘non-added value’ work by enhancing the structure of
your information…………
Read
Assemble
Present
Before…..
Analyse
Reduced administrative workload & Enhanced analysis
After
Read
Assemble
Structured data
Present
Analyse
Leveraging structured filings
• Making software capable of performing the information preparation
process:
– Reduce the error rate due to manual intervention
– Enable resources re-deployment to added value tasks
– Speed the process
• Making software capable of understanding and processing the
information means :
– Define data at its most basic level
– Define how data relates to other data
– Propose a meaningful definition to both producer and consumer
• Defining data for structured regulatory reporting involves the regulators
and all other supply chain members (regulated entities, other regulators,
auditors, data vendors, investors,….)
Leveraging structured filings
Illustration : the simplified prospectus under the new UCITS III
• Fund Managers have to produce simplified prospectus (standing data,
performance, fees, Total Expense Ratio,….) for the analysts, investors and
update it annually for the regulators
• Fund Managers have to prepare monthly, quarterly, annual financial reports to
the regulator
• Regulators collect and store the structured data under XBRL taxonomy from
simplified prospectus and financial reports
• Regulators enhance the validation and the consistence of information within
financial reports and between the financial reports and the simplified prospectus
Leveraging structured filings
Illustration : the simplified prospectus under the new UCITS III
• Each year, regulators can
save the reading, collection
and presentation of more
than 15,000 documents
(simplified prospectus +
financial reports)
• Saving time is dedicated to
the analysis and data
consistency between actual
financial figures and
prospectuses information
Five Principles for achieving efficiency
key building blocks for transitioning
to a content-driven automated information
Structured
filings
Shared
Vocabularies
Uniform
validations
Diverse
e-filing
methods
Clear-cut
transitions
Establishing shared vocabularies
•
Achieving efficiency for regulatory reporting is first of all a question of common
vocabulary (functional) design rather than technology design
•
Shared vocabularies among the supply chain are core to:
– Facilitate the set up of a global integrated reporting framework
– Avoid redundant data and reporting processes
– Reduce information collection and processing costs
•
The establishment of shared vocabularies refers to the set up of data
classification schemes:
– Hierarchical to allow classifications at multiple level
– Suitable for both numeric and non numeric data
– Versioned, allowing for evolution of scheme
– International and multilingual
– Extensible by regional or sector authorities or even by companies
Establishing shared vocabularies
‘’ To the extent that there is a shift from quantitative to qualitative
supervision, new additional tasks should not be introduced without
critically questioning existing regulatory requirements. Regulatory tools
and reporting requirements that have become obsolete should be abolished
without replacement.
XBRL provides organisations with a way to prepare, publish in a variety of
formats, reliably extract, and automatically exchange a wide variety of
business reporting information – financial and otherwise.’’
the time is ripe for regulators to (i) examine, together with the banking industry if and to what extent- they wish to promote the use of XBRL to cooperate across
borders and (ii) take advantage of such an opportunity to re-assess not just
the broad principles associated with regulation but also the specific
definitions of regulatory reporting concepts.
STATE OF INTEGRATION OF EUROPE’S FINANCIAL MARKETS - September 2004
COMMENTS OF THE Federation Banque Européenne ON THE REPORTS OF THE BANKING AND
SECURITIES GROUPS
Five Principles for achieving efficiency
key building blocks for transitioning
to a content-driven automated information
Structured
filings
Shared
Vocabularies
Uniform
validations
Diverse
e-filing
methods
Clear-cut
transitions
Allowing diverse e-filing methods
•
Why allow diverse e-filling methods?
– Reporting filling methods based on regulator proprietary or unique
software solutions are showing clear limitations and are globally
perceived as too costly
– Current solutions based on older technologies like EDI can not support
the data structure flexibility required by new regulations like Basel 2 or
IFRS
– E-filing is not only about turning paper reports into electronic reports
because that gives no process efficiencies
– Tomorrow’s technology environment will likely be composed of as many
or even more disparate technologies
•
Web services and XBRL allow different e-filling methods without requiring
change of technology or creation of interfaces
e-filing cost reduction at the US FFIEC
FDIC
OCC
FRB
OTS
NCUA
Today
FDIC estimates that
by requiring reports
to be filed in XBRL
the agency will
reduce processing
costs by 25 percent.
8900 Banks
FDIC
OCC
FRB
FFIEC
8900 Banks
OTS
NCUA
Future
Diverse e-filing methods opportunities
Five Principles for achieving efficiency
key building blocks for transitioning
to a content-driven automated information
Structured
filings
Shared
Vocabularies
Uniform
validations
Diverse
e-filing
methods
Clear-cut
transitions
Uniform Validation
Leverage from XBRL unique functionalities to achieve content
management far above the notion of electronic form and XML schema
XML SCHEMA-LEVEL INFORMATION
1) Primitive data type : value of X = 9 digits and not negative
2) Compound data structure : Cell A must contain values of B, C and D
XBRL TAXONOMY INFORMATION
3) Alternative naming : ‘Net income could refer to ‘income’ in other contexts
4) Supporting documentation : formal item definition is provided in IAS 39 section V.I
5) Presentation conventions : Balance sheet info should be listed as follows,…
6) Sum of data : Assets = current + non current assets
7) Semantic relationship : On form A, value of elements WY must equal value of XZ on
form B
XBRL FORMULA INFORMATION
8) Computing data values : Box 5 is the max of Box 4 and 50 % of Box 3
9) Co-Constraints among data values : Box 3 is ‘true’ if and only if Box 2 is the same as Box 1
10) Cross documents constraints : Box 5 must be greater than value of Box 4 on last year’s form
11) Distinguish among ‘fatal’ or ‘warning’ errors : If a negative value appears for Box 5 it MUST
be accompanied by a data text item with explanations
Validation and Submission
Pre-validate
Public
• Taxonomy
• Formulas
• Other links
Analyze
• Formulas
Analysis
Instance
Post-validate
Re-validate
Instance with
explanations
Five Principles for achieving efficiency
key building blocks for transitioning
to a content-driven automated information
Structured
filings
Shared
Vocabularies
Uniform
validations
Diverse
e-filing
methods
Clear-cut
transitions
Enabling clear-cut transitions
The lost-lost case scenario :
• Stand alone reporting model developed by regulators
• Regulated entities waiting the final results
A win-win scenario :
• Leadership must invest effort in education and knowledge transfer
• Demonstrate added value of the new solutions and prepare users to
change via proof of concepts
• Set up dedicated team to focus on maintenance, consistency and
change management aspects (maintenance organisation team at
Dutch Government project)
Towards standards based reporting
•
•
•
•
Awareness is done….. deployment time is coming
Regulators have integrated XBRL as a reporting solution for the future
Several European projects about enhanced regulatory framework (Spain, U.K,
The Netherlands, Belgium, Germany, Ireland,…)
Today, local regulators and European supervisory committees have the keys to:
– Promote a global framework which facilitates market transparency
– Facilitate the exchange of information between regulators / supervisors
– Answer to regulated entities concerns about the cost
•
Proprietary solution for supervisor may look good to the supervisor but costly
and complex for the regulated companies
•
XBRL & Web services are a unique solution to set up the basis for an
European framework where financial information can be exchanged and shared
in an open and transparent manner
Taxonomies for
Transparency:
Five principles for regulatory efficiency and effectiveness
of XBRL deployment in Europe
Laurent Collet ([email protected])
European Leader, Financial Services XBRL
Director, PricewaterhouseCoopers