ITS on supervisory reporting

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Transcript ITS on supervisory reporting

Technical Standards on supervisory reporting

XBRL UK 17 June 2013 | London Meri Rimmanen | EBA Wolfgang Strohbach | EBA

© 2013 | EBA | European Banking Authority

Outline

> Financial supervision in the EU – role of the EBA > > Single rulebook and the case for harmonised supervisory data Technical standards on supervisory reporting – main features > Facilitating implementation of supervisory reporting requirements

European System of Financial Supervision

EU central banks EU supervisors

ESRB Joint Committee ESFS

EIOPA EBA ESMA

Macro prudential Micro prudential

EBA regulatory tasks

Common rulebook

Maximum harmonisation ...but proportionate to different financial institutions EU Co-Legislators Sectoral Directives EBA role: provide advice EBA ‘Implementing legislation’ EBA issuing guidelines and recommendations (as before) Developing draft binding technical standards

Outline

> Financial supervision in the EU – role of the EBA > Single rulebook and the case for harmonised supervisory data > Technical standards on supervisory reporting – main features > Facilitating implementation of supervisory reporting requirements

Technical Standards on supervisory reporting

Objective: increase efficiency in reporting systems, enhance data analysis capabilities

Reporting before… and after…

Group A Supervisor 1 Supervisor 1 Group B Supervisor 2 Group A, B, C Common framework Supervisor 2 Group C Different data definitions Several formats Different technologies Supervisor 3 Supervisor 3 Common data definitions, instructions Single format IT standards

ITS on supervisory reporting - benefits

Directly applicable

> No implementation, or interpretation of the Regulation on national level ensures common definitions and instructions

Technical translation of reporting requirements

> Data point model and XBRL taxonomy > Common validation rules

Truly harmonised supervisory data

> Helps supervisors to assess asset quality, risk concentrations, liquidity positions, conduct peer analysis, analyse risk parameters across institutions > Harmonised definitions, especially on forbearance, non-performing loans and asset encumbrance significantly enhance identification of potential systemic risks

The role of EBA – main objectives and tasks

Main objectives: Main tasks: Establishing EU single rule book Develop binding technical standards, guidelines, recommendations Promoting and enhancing quality and consistency of supervision Promoting common supervisory culture / supervisory practices Reinforcing oversight of cross-border groups Peer group analyses and peer reviews Monitoring effectiveness colleges Early warning of upcoming vulnerabilities Effective early intervention and bank resolution EU-wide risk assessments and stress tests Risk dashboards Reacting on risk warnings Handling of emergency situations

EBA oversight tasks – data usage

Risk assessment

Enhancing regular and ad hoc thematic risk assessments

Stress testing

Building common methodologies and conducting EU-wide stress tests (in cooperation with ESRB)

Colleges

Enhancing and supporting effective Functioning of colleges

Risk dashboard

Building a system of key risk indicators (in cooperation with ESRB)

Crisis management

Building capacity to handle emergency situations

Benefits of harmonised data

> Data from banks across the EU provides a more comprehensive picture on exposures, risks, potential pockets of vulnerabilities > Peer analysis, identification of institutions posing systemic risk (outliers) > Provide high quality benchmarks for stress testing (harmonised definitions) and asset quality reviews > Improve analysis on concentration risk (large exposures, geographical breakdown of exposures) > Facilitate data sharing among competent authorities

Outline

> > Financial supervision in the EU – role of the EBA Single rulebook and the case for harmonised supervisory data > Technical standards on supervisory reporting – – – – – – – Solvency Financial reporting Asset encumbrance Large Exposures Liquidity Leverage ratio Proportionality > Facilitating implementation of supervisory reporting requirements

ITS on supervisory reporting – what is covered

EBA to deliver ITS in the following areas of the Capital Requirement Regulation (CRR):

> Art 99 Solvency reporting, financial reporting > Art 100 Asset encumbrance > Art 101 Mortgage exposures reporting > Art 394 Large exposures reporting > Art 415 Liquidity ratios reporting > Art 430 Leverage ratio reporting

Integrated approach to ITS development

> Several ITS packaged as one EU Regulation which is directly applicable to all credit institutions and investment firms > Use of common structure/conventions/concepts/definitions

ITS on supervisory reporting – COREP

Reporting population, level of application and scope of consolidation

> Credit institutions and investment firms > Consolidated level and individual level > CRD scope of consolidation

Frequency

> Quarterly > Exception: semi-annually – Material operational risk losses (OPR Details) – Securitisation transactions (SEC Details) > Reporting delay 6 weeks

Compliance monitoring

> Monitoring compliance of capital requirements regulation > Granular information on risk parameters, risk concentrations, securitised exposures > Based on the CEBS reporting guidelines

ITS on supervisory reporting - FINREP

Reporting population, level of application and scope of consolidation

> IFRS institutions on a consolidated basis > National supervisory authorities may extend the implementation also to other institutions > CRD scope of consolidation

Frequency

> Quarterly, semi-annually and annually > Reporting delay 6 weeks

Monitoring, IFRS-based reporting

> Harmonised financial reporting following as much as possible IFRS > Some presentational options have been restricted in order to develop harmonised templates > In some cases the data requirements go beyond IFRS to provide data for risk assessment and analysis of systemic risks > Forbearance and non-performing loans reporting > Based on the CEBS reporting guidelines

ITS on supervisory reporting - Modules

Liquidity Large Exposures Leverage Ratio Asset encumbrance

Application Frequency Objective

Monthly/quarterly 2/6 weeks reporting delay Monitoring and calibration EBA to report to the Commission Compliance monitoring Concentration risk monitoring Based on CEBS reporting Guidelines Monitoring and calibration EBA to report to the Commission Monitoring level of encumbered assets

Outline

> > > Financial supervision in the EU – role of the EBA Single rulebook and the case for harmonised supervisory data Technical standards on supervisory reporting – main features > Facilitating implementation of supervisory reporting requirements

ITS on supervisory reporting - Data Point Model

What is the DPM?

> A data point is a data element required in the reporting framework, i.e. each template cell will correspond to a data point, and different cells with the same meaning should correspond to the same data point.

> The DPM is a data model that captures the information requirements of the reporting framework. > The DPM is a dimensional model, meaning that each data point is categorised by a set of elements of different dimensions.

Why the DPM?

> Complex or dubious business concepts are broken down into more elementary concepts, in order to clarify the meaning of a data point.

> The DPM expresses the reporting requirements at a logical level, without regard for any particular IT implementation.

> The DPM bridges the gap between business and IT languages, providing a common ground of understanding.

> The DPM will be the source for the generation of XBRL taxonomies.

ITS on supervisory reporting - Proportionality

Reporting requirements shall be proportionate to the nature, scale and complexity of the activities of the institutions Proportionality included in different ways:

> Size of an institution – Small institutions are exempted for some templates (asset encumbrance) > Non-significant activities/exposures/risk – Threshold for level of exposure/activity (Geographical breakdown, derivatives in leverage ratio) > Inherent proportionality – Templates reported only if a special approach/method is used or if institution has exposures (SEC, SEC details, IRB) > Reduced frequency – Templates where reduced frequency provides adequate data (Group structure, detailed and contingent asset encumbrance)

Facilitating implementation – Q&A mechanism

Uniform interpretation of data requirements across EU

> Detailed instructions included in the ITS Annexes > Q&A tool on EBA website (as of July 2013) > Public can post their questions via a web tool > EBA will –Review, categorise and prioritise questions –Publish all answers –Translate answers where necessary

Facilitating implementation – General timeline

Dec 2011 • Public consultation on ITS (solvency, financial information and mortgage exposures) Feb 2012 • Public consultation on ITS (large exposures) June 2012 • Public consultation on ITS (liquidity and leverage) Sept 2012 • 1 st interim release of ITS package Mar 2013 • 2 nd interim release of ITS package July 2013 • Final ITS package (assuming CRR publication in OJ) Jan 2014 • ITS requirements apply (CRR application date: 1.1.2014)

Facilitating implementation – amendments of the ITS

Currently under consultation

> Asset encumbrance > Forbearance and Non-performing loans (FINREP) > Liquidity monitoring tools

The ITS will be amended with these parts after the consultations Application dates will be later than 1 January 2014