The Committee of European Banking Supervisors’ (CEBS) incoming financial reporting framework (FINREP) changes, which are due to be implemented by 31 December 2012, include a set of new data requirements resulting from the changes to the underlying reporting templates, according to Niamh Neary, Core expert at risk and regulatory compliance solution vendor FRSGlobal. CEBS has introduced the changes, which were published for industry comment earlier this year, in order to ensure a higher level of reporting harmonisation and increased comparability of reporting data across Europe.
In order to remove the current high level of national discretion around FINREP reporting procedures, CEBS has therefore adapted a maximum and minimum set of requirements based on a common set of data definitions. However, Neary notes that adoption of these new templates will not be mandatory across Europe, as national regulators can decide not to apply the guidelines. The regulators across Europe that do not comply will have to explain why to CEBS. So, further discrepancies between jurisdictions may persist.
If the majority of national regulators adopt them, the more prescriptive data requirements should help to iron out some of the reporting challenges faced by firms present in multiple jurisdictions across Europe. The proposals therefore set limits of the maximum amount of information permitted for national regulators to ask of financial institutions, thus ensuring gold plating does not occur. Pulling data from a central database into downstream systems to produce similar reports for each national regulator would be much easier than having to produce different data items and formats for each, after all.
One of the challenges will be, however, in coping with the increased frequency of these reports, which are currently produced annually. From 2012, reporting frequency can be quarterly, semi-annually or annually, according to CEBS, and the first reporting date will be 31 March 2012. The production of this data on a more frequent basis will require more robust data processes to ensure the data is accurate enough to be sent to regulators on a timely basis.
There are also a number of important data requirements within the altered templates including changes to how groups conduct FINREP reporting, with some permitted to combine their multiple entities for reporting purposes and others needing to report separately. According to Neary, there are also changes to the classifications around which instruments must be reported separately and the split of counterparty data for the reporting of OTC derivatives (a split between credit institutions and others). Assets and liabilities need to be split between the different geographic locations of counterparties, for example.
Moreover, the use of XBRL formatting for this data will not be mandatory but will be strongly recommended by CEBS in order to reduce the regulators’ manual processing burden. This will require many firms to invest in new technology to cope with these new formats, turning what is a manual process for many into an automated one.
Neary indicates that FRSGlobal will update its January release of its Data Foundation product to reflect the new reporting requirements and will release both core and non-core templates in April next year.