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Deloitte Consulting CVBA/SCRL Administrative burden measurement program - XI European Banking Supervisors XBRL Workshop 20 November 2009: 11.00 – 11.45.

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Presentation on theme: "Deloitte Consulting CVBA/SCRL Administrative burden measurement program - XI European Banking Supervisors XBRL Workshop 20 November 2009: 11.00 – 11.45."— Presentation transcript:

1 Deloitte Consulting CVBA/SCRL Administrative burden measurement program - XI European Banking Supervisors XBRL Workshop 20 November 2009: – Kurt Cogghe

2 - 1 - Agenda EU project on administrative burden measurement and reduction From measurement to reduction of the burden Interoperability at EU level and between EU and Member States Conclusions and questions

3 EU project on administrative burden measurement and reduction  The European Commission is driving an ambitious strategy to measure and reduce administrative burden for businesses imposed by current EU legislation.  In January 2007, the Commission presented an ambitious Action Programme, endorsed by the Spring European Council in March 2007, aimed at reducing administrative burden on businesses in the EU by 25% in  The Action programme uses the Standard Cost Model of the EU to identify information obligations, representing the largest administrative costs on businesses in the selected priority areas, in order to measure and develop reduction recommendations.  The Consortium consisting of Deloitte Consulting, Capgemini Consulting and Ramboll Management has been engaged to manage the EU AB project.  The project started in September 2007 and will now be extended to prolongue the efforts of the Consortium.  The Commission will launch a big communication on the Action Programme in October This communication will include the study results, the initiatives taken by the DG’s and the Member States to implement the recommendations as well as the programme’s next steps.

4 Scope of the measurement work Total EU law EU AB program 13 Priority Areas are selected Based on mapping of IOs stemming from 43 legislative acts, 20% of IOs are measured (workshop / interview) and the cost of 80% remaining IOs is estimated by experts For every priority area, field measurements are gathered in 6 member states; Data from 4 Member States with existing measurements are used as well. For the 17 remaining Member States, data are estimated based on measurements from other Member States. For every IO to be measured, 5 companies are interviewed. € The measurement results are extrapolated to obtain results in the 27 Member States 13 Priority Areas 43 Legislative acts EU IOs IOs to be measured 17 Member States 6 MS4 MS Total number of companies 5 companies Within 13 Priority Areas, 43 EU legislative acts are covered Expert estimations

5 The project scope is unique in its size… Agriculture and Agricultural Subsidies Environment Cohesion Policy Fisheries Company Law Financial Services Food Safety Statistics Public Procurement Transport Pharmaceutical Legislation Value Added Tax Working Conditions 13 Measuring administrative burden stemming from 43 pieces of legislation expected to account for 80% of total EU red tape  Unique coverage of 13 policy domains

6 …as well as in its complexity An innovative methodology allowing us to identify the administrative cost at European level and to quantify potential reductions in red tape  Analysis covering 27 Member States An intensive data collection phase… Over interviews with businesses covering all 27 Member States Approximately 100 workshops with businesses and industry experts Approximately 500 meetings and workshops with national government authorities and European Commission officials … leading to a unique intelligence Over cost data collected and documented, stored in a specially developed IT tool Approximately 350 documented processes describing how businesses comply with the legal obligations Benchmark data comparing policy domains, countries, company sizes and sectors… Approx. 400 identified specific reduction recommendations out of which 100 have been further analysed and 24 are prepared for implementation

7 - 6 - Agenda EU project on administrative burden measurement and reduction From measurement to reduction of the burden Interoperability at EU level and between EU and Member States Conclusions and questions

8 Maximum reduction potential can be realised through a combination of legal changes, process optimisations and e-Government solutions E-Government Reduction Initiatives at EU Level Reduction Initiatives at EU Level Legal Process 9% 24% 61% 6% Reduction Initiatives at National Level Reduction Initiatives at National Level Interoperability / Harmonising standards Interoperability / Harmonising standards

9 Overall measurement results for the 13 Priority Areas The following table provides a detailed overview of the total administrative cost, the business-as-usual costs (BAU) and administrative burden distribution across the measured Priority Areas.

10 Overall reduction potential results for the 13 Priority Areas Priority Area Total Administrative Burden (kEuro) Impact of reduction proposals on business Impact (kEuro)Impact (%) Fisheries 73,863 46, % Annual Accounts/Company Law 13,958,508 8,320, % Agriculture and Agricultural Subsidies 3,823,074 1,847, % Tax Law (VAT) 69,236,350 29,475, % Statistics 552, , % Public Procurement 216,306 73, % Cohesion policy 929, , % Transport 3,026, , % Working environment / Employment relations 3,786, , % Environment 622, , % Food Safety 3,927, , % Pharmaceutical Legislation 845, , % Financial Services 715,243 79, % Total 101,712,878 44,881, %

11 Legal acts and IOs in scope for the FSI recommendation Legal acts:  Directive 2006/48/EC of the European Parliament and of the Council of 14 June 2006 relating to the taking up and pursuit of the business of credit institutions (recast): Article 74.2 – “Reporting of results of the verification of compliance with rules on the level of own funds”.  Directive 2006/49/EC of the European Parliament and of the Council of 14 June 2006 on the capital adequacy of investment firms and credit institutions (recast): Article – “Reporting to competent authorities on compliance with rules.”  Directive 2002/83/EC Directive 2002/83/EC of the European Parliament and of the Council of 5 November 2002 concerning life assurance is also in scope for the part of the Recommendation relating to expanded use of XBRL for additional reporting requirements in future Information Obligations:  IO 1) “Reporting of results of the verification of compliance with rules on the level of own funds”, (Article 74, para. 2 of Directive 2006/48/EC  IO 2) “Reporting to competent authorities on compliance with rules” (Article 35(1-4) of Directive 2006/49/EC)

12 Main findings for the FSI –49 EU requirements + 4 Possibilities mapped –Transposition resulted in 1,234 national requirements –Measurement was conducted in Italy, Lithuania, Luxembourg, Poland, Spain and Slovenia –The overall administrative cost for the selected pieces of legislation = €1,357 million EU-wide –Of the €1,357 million due to EU IOs and Possibilities, 53% (ca. €715 million) has been classified as administrative burden –Five IOs alone account for 96.5% of the total administrative cost arising from EU IOs EU Legislation in scope Directive 2002/83/EC concerning life assurance. Directive 2006/48/EC relating to the taking up and pursuit of the business of credit institutions Directive 2006/49/EC on the capital adequacy of investment firms and credit institutions.

13 Most burdensome IOs identified for Financial Services EU requirementEU legislationArticle No. Administrative cost (€ x 1,000) Administrative burden (i.e. without business-as-usual costs”) Admin. burden (€ x 1,000) Share of admin. cost (%) 1. Provision of information to the policy holder Directive 2002/83/ECArt , , Proof for internal reviewDirective 2006/48/ECArt , , Keeping a trading bookDirective 2006/49/ECArt. 11(1)262, Reporting to competent authorities on compliance with rules Directive 2006/49/ECArt. 35(1-4)168, , Public disclosure of information by credit institutions Directive 2006/48/EC Art. 145 to 149; Art , ,

14 From measurement to reduction of the burden  Assessment of different ways to reduce the burden: –Change of the legal framework –Process optimisation –E-Government potential  Initiatives at two levels: –At European level –At national level (best practices)  Result for the 13 Priority Areas in scope of the project: More than 320 recommendations mapped 100 recommendations shortlisted 23 recommendation prioritised by the European Commission

15 Main Financial Services Recommendation (1) Harmonise the use of XBRL-based COmmon solvency ratio REPorting (COREP) in the EU and use as a basis for extension of XBRL reporting to other reporting requirements to and amongst supervisors Potential burden reduction: COREP harmonisation:substantial XBRL applied to further reporting requirements: substantial Harmonise the use of XBRL-based COmmon solvency ratio REPorting (COREP) in the EU and use as a basis for extension of XBRL reporting to other reporting requirements to and amongst supervisors Potential burden reduction: COREP harmonisation:substantial XBRL applied to further reporting requirements: substantial AS IS situation and critical analysis Administrative costs and burden are created due to the failure to harmonise the reporting requirements across Member States, as institutions have to familiarise themselves with the specific reporting requirements across Member States, and have to implement changes to systems in order to comply with the specific national requirements. In addition to imposing an increased burden on the industry, the lack of a harmonised reporting structure also impedes the efficient exchange of information among Member States. As a recent example of supervisory difficulties, the de Larosière group pointed out specifically that no common reporting formats have been agreed. The Committee of European Banking Supervisors (CEBS) has initiated a common framework for addressing this. Known as COREP (COmmon solvency ratio REPorting - COREP), this aims at harmonisation of reporting of solvency requirements. CEBS initiated this work in support of the reporting required under Basel II. As part of the adoption of the COREP framework across the European Economic Area, some countries have decided to use XBRL (eXtensible Business Reporting Language), a type of XML (eXtensible Markup Language). The actual implementation of the taxonomies is not fully aligned across EU Member States as some countries have developed national extension taxonomies. Second, not all countries use XBRL.

16 Main Financial Services Recommendation (2) Proposed TO BE situation The Recommendation aims at easing the business process which financial institutions have to fulfil for complying with the IOs in scope. Multinational institutions are the target group. If the way Basel II prudential reporting is conducted were harmonised, this would be done by means of: Applying standardised COREP-templates; Excluding the possibility of adding additional reporting fields to the templates at a national level; Applying XBRL as the standard open-standard-based electronic transmission of financial information Advantages of the recommendation Harmonisation of both reporting format and reporting technology will contribute to the objective of reducing the administrative burden for the financial services industry, and is also an important factor in ease of information sharing amongst supervisory authorities and enhances comparability between national entities of an international firm. As CEBS has already developed an XBRL taxonomy for their COREP templates, using XBRL for other IOs might lead to efficiency gains. Obviously, also other open-standard-based electronic transmission could be considered. The use of electronic reporting allows for automation of: Data collection at the credit institution, investment firm or assurance undertaking; Reporting; Processing by the regulator. This results in: Faster reporting; Accurate reporting; Faster responses.

17 Agenda EU project on administrative burden measurement and reduction From measurement to reduction of the burden Interoperability at EU level and between EU and Member States Conclusions and questions

18 Interoperability advisory in current projects (1) ENTERPRISESNATIONAL GOVERNMENT SUPRANATIONAL GOVERNMENT  Position of XBRL in financial datawarehouse architecture. Use of XBRL for corporate consolidation: Deloitte’s consolidation center of excellence.  EC DG Enterprise – ALIFE: administrative burden reduction, redesign of information obligations.  EC DG Digit – European interoperability strategy (IDABC): communication between member states & the EU.  National institutions: taxonomy advisory,…. National institutions “ALIFE” Admin burden reduction European interoperability strategy - Financial DWH architecture - Consolidation Various clients

19 Interoperability advisory in current projects (2) Supporting the European Interoperability Strategy Elaboration Politics and legal Information exchange Service offerings Processes and organisation What legal and political issues are involved? What information is needed to comply to political and legal constraints? How will we organize the information, what stakeholders are involved? What technologies are involved, what procedures do we need to follow? How are the services be concretised, what are the concrete interoperability requirements? How does the managed service data maps on the information needs (eg. Semantics)? Political evaluation, new laws,...? What services are useful to help gathering and managing the needed information?

20 Agenda EU project on administrative burden measurement and reduction From measurement to reduction of the burden Interoperability at EU level and between EU and Member States Conclusions and questions

21 Topics to take into consideration  Financial crisis leads to pressure for more regulation of FSI…  Lack of trust in FSI leads to demand for direct control also at micro-level…  More regulation / control leads typically to more administrative burden…  Financial institutions and governments / administrations are under high pressure to reduce costs… Processes will need to be implemented in a cost efficient and highly coordinated way (across financial institutions / national banks / ECB / EC) … and all of this in an ever changing environment (cf. the reform of the European financial supervision)

22 XBRL as “just another format” Corporate Subsidiary C Subsidiary B Subsidiary A ERP Systems GL Internal reporting External Reporting Local Financial DWH Risk & change mangement: this scenario reflects the as is situation. Low direct dependency on evolution of the XBRL standard and XBRL dictionaries (IFRS, FINREP, COREP,...) Advantages of XBRL No synergy between data validations for external and internal reporting. Reduced auditability & traceability, since the XBRL conversion is outsourced. Flexibility and business ownership: external XBRL black box, no internal leverage of XBRL functionalities. Common definitions (metadata) and multi- language support: standard functionality of XBRL is not leveraged internally. Rely on internal proprietary solution. Considerations Data Capture GAAP IFRS Consolidation Corporate Financial DWH Internal reporting External Reporting Corporate ERP Systems

23 XBRL for group consolidation Corporate Subsidiary C Subsidiary B Subsidiary A ERP Systems GL Internal reporting External Reporting Local Financial DWH Leverage of XBRL validation for the consolidation process. Improved auditability & traceability. Leverage XBRL to streamline the consolidation process, allowing shorter cycles and increased frequency. Improved business ownership: XBRL facilitates the transfer of ownership from IST to business. Build internal XBRL expertise, iso maintaining a “black box” external filing agent. Common definitions and multi-language support: rely on a market standard iso a proprietary solution. Risk & change management: Scenario B provides a logical first step to leverage the XBRL standard internally. Advantages of XBRL Direct internal dependency on external evolution of the XBRL standard and XBRL dictionaries (IFRS/ FINREP/ COREP/...) Common definitions: partly in XBRL dictionaries (consolidation scope), partly outside (local EPM/GAR...) Acquisition of XBRL expertise s required, a.o. in order to extend standard XBRL dictionaries for internal use. Considerations Data Capture GAAP IFRS Consolidation Corporate Financial DWH Internal reporting External Reporting Corporate ERP Systems

24 XBRL embedded in the business operations Corporate Subsidiary C Subsidiary B Subsidiary A ERP Systems GL Internal reporting External Reporting Local Financial DWH Maximum leverage of XBRL functionality: validations, auditability, reporting supply chain standardisation, metadata repository. Maximize business ownership of the reporting process. Advantages of XBRL Direct internal dependency on external evolution of the XBRL standard and XBRL dictionaries (IFRS/ FINREP/ COREP/...) Profound investment in XBRL expertise is required, at all levels in the supply chain. Today, there is very little practical experience in the market for this scenario. Considerations Data Capture GAAP IFRS Consolidation Corporate Financial DWH Internal reporting External Reporting Corporate ERP Systems


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