banking supervision track
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19 th XBRL International Conference “Reducing regulatory burden with XBRL: a catalyst for better reporting” June 22-25, 2009 Paris, France. Banking Supervision Track XBRL-based Basel II Reporting System: Experience of Reserve Bank of India A S Ramasastri & P R Ravimohan June 24, 2009. - PowerPoint PPT PresentationTRANSCRIPT
Banking Supervision TrackXBRL-based Basel II Reporting System:
Experience of Reserve Bank of IndiaA S Ramasastri & P R Ravimohan
June 24, 2009
First Three Steps
The Basel II Path
Fast Track XBRL
Future Roadmap
About 20 departments of Reserve Bank of India receive data at about 20 locations from about 200 commercial banks with about 70000 branches
Templates for reporting, called returns, which are around 250 as on date
Varying degrees of technology levels across banks
Attempts to rationalize the returns and to streamline multiple modes of data submission resulted in the origin of Online Return Filing System (ORFS)
An important fortnightly return called Form A has been brought under ORFS
It has been designed and developed using XML tags – to be in readiness for adopting XBRL
Based on the experience, the system has been extended to another 50 returns
To standardize the data elements across returns and to be in line with international practices, XBRL was considered
The Governor formed a High Level Steering Committee with the Deputy Governor as Chairperson to implement XBRL-based data reporting by banks
After a pilot study and feasibility analysis, the Committee mandated implementation of the newly introduced Basel II reporting system under XBRL
Basel II implementation is a simultaneous journey, going parallel
India has been adopting international best practices in the area of banking regulation in a well calibrated manner which is suitable to requirements of the financial system
Reserve Bank of India has emphasized on strengthening of regulation on capital adequacy as a key parameter in promoting financial stability
India adopted Basel I in a phased manner from 1992 onwards
India stipulated the capital to risk weighted asset ratio of 9.0 % as against international norms of 8% and a Tier I capital ratio of 6%.
Capital charge for market risk in line with market risk amendment of 1996 to the Basel I accord was adopted in 2005.
India adopted Basel I in a phased manner from 1992 onwards
India stipulated the capital to risk weighted asset ratio of 9.0 % as against international norms of 8% and a Tier I capital ratio of 6%.
Capital charge for market risk in line with market risk amendment of 1996 to the Basel I accord was adopted in 2005.
Implementation of Basel II in India has been in a phased and calibrated manner
All commercial banks in India have migrated to Basel II as on March 31, 2009
To begin with, India has adopted the basic / standardised approaches of Basel II.
RBI has also been preparing simultaneously for introducing advanced approaches for those banks which have sophisticated risk management structure
Pillar 1Pillar 1 Minimum Capital Minimum Capital
RequirementRequirement
Capital for Capital for Credit RiskCredit Risk((SASA; FIRB; ; FIRB;
AIRB)AIRB)
BaselBasel IIII
Capital for Capital for Market RiskMarket Risk(SMA; (SMA; SDASDA; ;
IMA)IMA)
Pillar 2Pillar 2Supervisory Supervisory
ReviewReview
Pillar 3Pillar 3Market DisciplineMarket Discipline
Capital for Capital for Operational Operational
Risk (Risk (BIABIA; SA; ; SA; AMA)AMA)
The current global financial turmoil has brought to sharp focus the role of capital regulations in promoting financial stability and mitigating procyclicality
Capital should serve as an effective buffer to absorb losses over the cycle, so as to protect both the solvency of financial institutions in the event of losses, and their ability to lend.
The recent London Summit by G 20 has articulated certain action points on capital regulation
G20 Leaders should support the progressive adoption of the Basel II capital framework, which will continue to be improved on an ongoing basis, across the G20.
In this context, the BCBS should develop standards to promote the build-up of capital buffers in good times that can be drawn down in periods of stress. The BCBS should also complement risk-based capital measures with simpler indicators to monitor the build-up of leverage.
The international standard for the minimum level of capital should remain unchanged until the financial system has recovered.
Underestimation of risk and the consequential underpricing of risk are attributed as major factors for the present crisis.
Since Basel II attempts to build a more risk sensitive framework for capital regulation it is essential that the information flow is designed to be timely and accurate
The implementation of Basel II has thrown up several challenges due to its requirement of timely receipt of information from banks in a standardised and transparent format and at the disaggregated level.
One of the challenges is upgradation of bank-wide information system through better branch connectivity within banks and then integrating this with the regulatory reporting
Under Pillar II of Basel II, RBI has to ensure that banks assess accurately all the risks they are exposed to and accurately determine the capital they need to have in commensurate with their risk profile
Under Pillar III (Market Discipline) of Basel II suitable disclosures have to be made by the banks so as to enable the market participants to take informed decisions
RBI has been monitoring banks’ exposure to certain sensitive sectors with a view to ensuring prescription of appropriate risk weight
RBI has been in a calibrated manner revising risk weights and provisioning relating to sensitive sectors with the objective of ensuring asset growth with minimum volatility.
Basel II implementation thus requires quicker,
quantitative and qualitative analysis of financial
information by the regulator so that banks can be
monitored closely vis-a-vis Basel II guidelines and
certain corrective policy measures be taken
These requirements of efficient, standardised and
transparent reporting system which facilitates
accurate and reliable extraction of data led RBI to
introduce XBRL reporting system for Basel II reports
from banks
The Basel II framework also offers multiple options of
increasing sophistication for computing capital
requirements for the three major categories of risks.
While for the present, banks are required to adopt the
relatively simpler approaches available under the
framework, RBI may permit few banks to migrate to
advanced approaches
A draft time frame for the purpose has been drawn up
Implementation of advanced approaches would require
tremendous data processing at the bank level and RBI
The requirement of maintaining long time series data, processing it and modelling several variables would throw up several issues of reporting within the banks
The requirement of assessing the data quality of
the banks and validating the models of the banks will be dependent on real time and seamless information flow between banks and RBI.
The XBRL project would be critical in this regard.
High Level Steering Committee Involvement of banks Interaction with international institutions –
Europe, Japan, Australia Learning from best practices in other
central banks – Bank of Spain Working closely with external consultants Moving the other stakeholders in India
As directed by the High Level Steering Committee, the Capital Adequacy Return (RCA 2), based on the Basel II norms has been taken up first
A 2- stage approachAn Excel Based Report preparation ToolA web portal for
Submission of Returns by the BanksViewing Bank Returns and MIS Reports by RBI
A Dimensional XBRL Taxonomy sits on top of both these applications
Taxonomy tailored to Basel II Reporting Requirements XBRL 2.1 and Dimensional Specification Compliant Taxonomy Architecture along COREP lines Multi dimensional in nature and template based
information capture
Modules Templates
Capital requirements 2
Credit risk exposure 9
Market risk exposure 4
Operational risk exposure 1
Total 425
Primary Elements 128
Dimensions 29
Domain Members 253
Hypercube 15
31
At RBI’s end, following facilities/advantages : ◦ generating standard and ad-hoc reports as required◦ maximum possible automation of processes◦ more analysis facilitated since less of data related issues
expected◦ ease of incorporating data for various analytical studies and
periodic reports◦ Quicker access to bank analysts and inspection officials◦ Provision for automated signalling of “red flags” in submitted
data which would need further analysis◦ Access of the centralized data repository by other departments
like banking policy department, monetary policy department, financial markets department etc. as required
◦ Use of business intelligence tool for advanced analytics and drill-down/roll up facility
Phased Approach In Phase I, Basel II reporting implemented International Seminar coinciding with
launch Sec 42 Return under ORFS being brought to
XBRL standards Taxonomies for Annual Accounts being
developed
Institute of Chartered Accountants of India (ICAI) has been working towards ◦ Formation of XBRL-India jurisdiction◦ Development of Taxonomies
Taxonomies for C&I already developed – yet to be implemented
Banking taxonomies getting developed RBI and ICAI are working closely
Industry-based classification◦ Commercial and Industrial companies◦ Banking companies◦ Non-Banking Financial companies
Core Schema ◦ Exhaustive list of all element declarations◦ Common elements defined once
Distinct extended links for each industry
Designing general banking taxonomy in accordance with the C&I taxonomy◦ Based on IFRS 2006◦ No dimensions
RBI can use the banking taxonomy and extend it to include dimensional structure◦ FINREP structure
IFRS 2006 IFRS 2008Release date 15th August 2006 24th June 2008
Modularity The files (Schema and linkbases) are located in one folder.
The files are organized based on the IAS and IFRS. There is a core schema containing all the elements defined, and linkages to the different folders for every IAS and IFRS.
Structure There was a common entry point, wherein the users had to select and browse the taxonomy.
The entry point is entity specific and hence has to be created by the user of the taxonomy.
Elements i) 4100 (approx) i) 2700 (approx)
ii) Elements outside the IAS and IFRS (common practices and industry specific) are included in the taxonomy
ii) Elements only from the IAS and IFRS are part of taxonomy
Dimension Vs. Tuples Tuples are used in the taxonomy
Dimensions have been included in the taxonomy
Notes to accounts information is largely tabular and therefore is
Multi-dimensional data Data points having similar attributes
IFRS 2006 – Does not use dimensionIFRS 2008 – Includes dimensions
1. Repo transactions2. Composition of Non-SLR investments3. Exchange traded Interest Rate derivatives4. Risk exposure on Derivatives5. Maturity pattern of certain items of assets
and liabilities6. Risk category wise country exposure7. Loan Assets subject to restructuring8. Segment reporting9. Related party disclosures
Maturity Deposits Advances Investments Borrowings Foreign Currency assets
Foreign Currency liabilities
1 to 14 days
15 to 28 days
29 days to 3 months
Over 3 months & up to 6 months
Over 6 months & up to 1 year
Over 1 year & up to 3 years
Over 3 years & up to 5 years
Over 5 years
Total
PRIMARY ELEMENTS
DIMENSION
• Based on IFRS 2006– Banking specific tags have been defined additionally in the
core schema– Separate extended links for the bank reporting appended to
existing taxonomy– Basic structure of financial statements and their details,
both included in the same extended link (unlike C&I)– No dimensions have been defined, instead extended links
have been used
• Implement the system for March 2010 reporting