One of the stranger happenings during the lengthy US reform negotiation process was that a provision to require the use of Extensible Business Reporting Language (XBRL) for financial data reporting was unexpectedly struck from the financial regulation reform bill, which was passed this week. Given that XBRL is being touted as the next big thing for data management efficiency and players such as Swift and the DTCC are keen to extend its reach into the world of corporate actions, what will this rather strange regulatory development mean?
The XBRL provision was dropped out of the Senate version of the bill without explanation and much to the consternation of key proponent representative Darryl Issa, who has since vowed to bring the XBRL provision before the full House for a separate vote.
The amendment Issa originally proposed for the Dodd-Frank bill would have required regulators to use a standard electronic format such as XBRL only for a few types of transactions, collecting and publishing business information from the financial industry. However, Issa withdrew his original proposal to work on an expanded version with the staff of the House Financial Services chairman Barney Frank. The new proposal would have affected almost every aspect of financial data collection in the regulatory overhaul bill, but it has since been canned.
The omission of the provision will, no doubt, also go down like a lead balloon with the Securities and Exchange Commission (SEC), which has been a key proponent of the data tagging standard since its passing of a rule in December to require XBRL reporting for financial disclosures. XBRL has also garnered the attention of European regulators and the Committee of European Banking Supervisors (CEBS) most recently noted its potential in the area of risk data reporting.
Swift, XBRL US and DTCC will also take note of the development due to their project to introduce XBRL to the corporate actions space. Last month, they published their business case to this end, which indicated that the introduction of XBRL to this corner of the market could result in an estimated saving for the industry of US$400 million a year and potential direct savings to investors and their investment managers of US$172 million annually.
Given their championship of the standard thus far, it is unlikely that the political machinations involved in the putting together of the reform bill will deter XBRL’s proponents in the long term. Issa is certainly determined to get it back on the political agenda and the SEC will ensure it remains on the regulatory agenda for the near future.
As for its future in Europe, that’s anyone’s guess at this point. Swift and other parties may be keen, but there are many that feel XBRL is not an appropriate format for these markets.
