Driving ROI through f inancial r eporting
description
Transcript of Driving ROI through f inancial r eporting
Driving ROI through financial reporting
Jason McCreight, Deloitte
Outline
1. Introduction2. Regulatory landscape for banks3. XBRL4. XBRL and Multidimensionality5. Data Point Models and Dimensions6. Standardised Reporting7. Multidimensionality in Regulatory Reporting8. Implications For Banks9. Benefits Beyond Compliance10. Summary
1. IntroductionA coming of age for regulatory reporting
CRDIV proposes a number of measures to
raise the quality, consistency and
transparency of banks’ capital.
XBRL submission of COREP and FINREP
data will be mandatory:Q1 2014
XBRL is rapidly gaining acceptance as a standard
global framework to support the more effective production, consumption and exchange of financial
information.
2007 … 2011 2012 2013 2014 2015 … 2020
2. Regulatory landscape for banksA recap of the past five years
CRD IV(European BASEL III
adaptation)
EBA(European Supervisory Authority)
Banking(National Supervisory Authority)
COREP FINREP
European Directives
Financial Supervision
ReportingObligations
Basel III(CRDIV)
Basel I & II (CRD, II, III)
Basel III(CRDIV)
Automated “eRegulation” &
XBRLManual EUC & paper reporting
2. Regulatory landscape for banks“Navigating the Compliance Labyrinth”: A Deloitte
Publication
Deloitte Centre for Banking Institutions:
20 of largest 50 US banks by assets
http
://www.finextra.com/finextra-downloads/newsdocs/Deloittecompliance.pdf
of respondents agreed strongly that compliance with regulatory
requirements had become more challenging over the last five years
of respondents agreed strongly that compliance with regulatory requirements will become more challenging in the next 3-5 years
increase in expenditure on compliance
159%
95%
90%
3. XBRLThe basics
•A language for the electronic communication of business and financial data revolutionising business reporting•XBRL’s impact on financial reporting and data exchange has been compared to the impact of bar-coding on merchandising
What is XBRL?
•Mandated part of how financial organisations will have to submit automated prudential reports in the fourth iteration of the Capital Requirements directive (CRDIV)
•Standards-based method allowing more efficient preparation, publishing, exchange, and analysis of regulatory financial data
Why is it being adopted?
•COREP and FINREP submissions must be made in XBRL•Banks should expect a global adoption of XBRL from Q1 2014 onwards
When will it become mandatory?
•The cost savings stemming from greater efficiency and improved accuracy & reliability can be realised by all those involved in supplying or using financial data
•The capabilities of the regulator to analyse and compare financial data will be dramatically enhanced.•Greater market efficiencies can be realised across global capital markets•Investors are allowed an “apples for apples” perspective when comparing financial information•Streamlining financial reporting processes can eliminate divergent systems within businesses, thus reducing costs
Who benefits?
3. XBRLA global standard for business reporting
XBRL
Powerful and flexible, specifically designed to meet the requirements of financial information.
“Tags” enable automated processing of business information by computer software, allowing the data to be treated “intelligently”.
Shows how items are related to each other, thus representing how
they are calculated.
Identifies whether data fall into particular
groupings for organisational or
presentational purposes.
Local banksNational
Supervisory Authority
EuropeanBankingAuthority
XBRL mandated by EBAXBRL
4. XBRL and multidimensionality• A multidimensional database (MDB) is often called a “cube”. This is
a dramatic simplification as they can often have many more than the 3 dimensions that this visually represents
• It is a database optimised for analysis• These databases can rapidly process data so that answers can be
found quickly• The data elements in the COREP reporting templates have been
converted to a highly structured multi-dimensional data model• NSAs and banks can use the Data Point model to structure the
design and processing of their internal reporting processes end systems.
Bank NSA
DPM approach allows both banks and NSAs to align their systems to the data definitions
DPM
Bank NSA
Requires manual interpretation and re-keying of data
Traditional Approach DPM Approach
5. Data Point Models and DimensionsExamples
Data point model Dimension
6. Standardised Reporting
Solution 1 Solution 2 Solution 3
Regulator
Bank YBank X Bank Z
Solution 1 Solution 2 Solution 3
Bank YBank X Bank Z
XBRL
Regulator
• XBRL’s impact on financial reporting and data exchange has been compared to the impact of barcodes on merchandising
• Like the barcode, XBRL is a system for coding and decoding information:
i. Multiple forms of information consolidated into a single, standards-based formatii. A single piece of financial data is multidimensional
7. Multidimensionality in Regulatory ReportingCRDIV XBRL as a transition mechanism
• Multidimensional data is very rich and powerful• In an ideal world a Regulator could provide an MDB & ask it to be populated. However
numerous software companies provide solutions• It is this link that businesses can leverage to enhance other internal and external reporting
and go “on the offensive”, whilst simultaneously adhering to regulatory standards
XBRL REGULATORY
Standardised Transmission of data between Banks & Regulators
BA
NK
S
REGULATORY CUBE
8. Implications For Banks
“Apples to Apples”
Comparability
Regulator Power,
Control & Insight
Investor demands for high quality information
Response to change
Regulators will have far more power and control over data in coming years, given the flexibility of the
new XBRL reporting process.
Domestic and foreign banking institutions
should expect tougher oversight and
enforcement of regulatory
compliance, beyond COREP and FINREP.
CRDIV will be an evolutionary process and will require time for the standards to
stabilise and become clear.
Banks should expect to further investment requirements in 2014
and beyond.
9. Benefits Beyond Compliance
Standards-based
Extensible
Automated
Reliable
Transparent
Convergent
ConsistentXBRL
Value-add effort maximisation
10. Summary
• XBRL is a data transmission mechanism.• However it is different to many of its predecessors as it allows the
richness of multidimensionality to be built in & retained• This kind of technology is quite new – it has been around for 20 years• It has been adopted & used consistently in Finance functions; handling
results consolidation & publication, planning & analytics• Today’s principle point was that it can also be used more in the
Regulatory area.• Wider use should help to produce and analyse accurate data more
efficiently• It can be used both by the banks & the regulators to drive greater
compliance but should also produce benefits beyond this