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Paris, June 22nd to 25th, 2009 Giancarlo Pellizzari Head of Prudential Policy Dexia Group Implementing XBRL for a cross-border banking group in Europe.

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Presentation on theme: "Paris, June 22nd to 25th, 2009 Giancarlo Pellizzari Head of Prudential Policy Dexia Group Implementing XBRL for a cross-border banking group in Europe."— Presentation transcript:

1 Paris, June 22nd to 25th, 2009 Giancarlo Pellizzari Head of Prudential Policy Dexia Group Implementing XBRL for a cross-border banking group in Europe

2 22 What does XBRL mean for Dexia? Agenda Implementing XBRL for a cross-border banking group in Europe Agenda Experiences COmon REPorting FINancial REPorting IFRS Taxonomy Conclusion Introduction

3 33 What does XBRL mean for Dexia? Agenda Implementing XBRL for a cross-border banking group in Europe Introduction Experiences COmon REPorting FINancial REPorting IFRS Taxonomy Conclusion Introduction

4 44 Implementing XBRL for a cross-border banking group in Europe A group of approx. 250 entities, more than staff members, present in 37 countries (21 EU member countries) What is Dexia ? Introduction

5 55 In terms of Reporting : Public Reporting – Solo Financial Statements in local GAAP (or IFRS when allowed) and Conso Financial Statements in IFRS or local GAAP (Dexia Group using IFRS at consolidated level) – Pillar III (Basel II public reporting) Regulatory Reporting – COREP – FINREP – Pillar II – MIFID – ECB Statistics – SEC filings – Other local GAAP reporting (Schema A, BAFI, etc.) Other Reporting – Tax – Legal/social Our Environment Implementing XBRL for a cross-border banking group in Europe Introduction

6 66 Our Environment Introduction Implementing XBRL for a cross-border banking group in Europe BE LU FR SAP Holding DBB DCL DBL STATUTORY VISUAL SCOPE MIS CONSO ESSBASE CHECK MAGNITUDE COMMON PARAM SPEC. LOCAL PARAM CONSOLIDATED CONSO DHLD CONSO DBB CONSO DCL CONSO DBL INTERNAL REPORTING EXTERNAL REPORTING

7 77 Implementing XBRL for a cross-border banking group in Europe Complexity? Basel II IFRSSolvency II Pillar I Pillar III IFRS 7 F/S Pillar III Pillar I + notes Group Group Group Group BE (+group) BE BE FR LU BE FR LU Introduction

8 88 Implementing XBRL for a cross-border banking group in Europe Complexity? (Example) Introduction Maximum Credit Risk Exposure is referred to in Solvency II, Basel II and IFRS regulations. Of course, as the regulations are different, a slight shift in the definition is present and leads to distortions of the presentation of the same concept in the different reports. As highlighted on the next slide, the same information is requested in three different reporting. A complete reporting under XBRL could help providing an harmonized concept and avoid double or even triple entries for one information. Furthermore, no precise and harmonized definition does exist, some reporting companies are considering full exposure, other non-depreciated exposure etc.. Above the problem of definition, another challenge is to comply with all the different interpretations for each country. Cross-border reporting turns out to be a real nightmare. Find a definition internally that may fit all regulations.

9 99 What does XBRL mean for Dexia? Agenda Implementing XBRL for a cross-border banking group in Europe What does XBRL mean for Dexia? Experiences COmon REPorting FINancial REPorting IFRS Taxonomy Conclusion Introduction

10 10 Implementing XBRL for a cross-border banking group in Europe A good preparer must therefore compare regularly its financial statements with the ones of its peers (information to be obtained from Financial Communication department or analysts surveys), to be sure that its options are in line with the others Why is XBRL interesting for a preparer? Therefore : benchmarking ! What does XBRL mean for Dexia ? Organizing the presentation of financial statements True and fair view (Framework §46) Respect of accounting standards use for preparation … and neutrality (Framework §36)

11 11 Implementing XBRL for a cross-border banking group in Europe Reviewing the financial statements Base of presentation Options selected in accounting standards Valuation principles Compare them with peers (Framework § 39) Etc… A good analyst must therefore compare regularly the Financial Statements, mainly the disclosures, presentation and valuation policies, to be sure that the financial statements are comparable Why is XBRL interesting for an analyst? Therefore : benchmarking ! What does XBRL mean for Dexia ?

12 12 Implementing XBRL for a cross-border banking group in Europe Dexia is active in XBRL since The Past We saw the regulators attraction to XBRL because it was the right IT language to fit their needs in IFRS and Basel II reporting XBRL was seen as a powerful tool for reducing administrative burden internally (Use XBRL as a tool for more harmonization, flexibility and gain of time both vertically and horizontally) Importance of exchange of data in a cross border banking group (Internally and externally) Importance of having one language with all regulators WHY? What does XBRL mean for Dexia ?

13 13 Implementing XBRL for a cross-border banking group in Europe Use of XBRL in various regulatory reporting in European countries: COREP FINREP MIFID Pillar II The Present What does XBRL mean for Dexia ? Dexia is still active in XBRL: Participation (as much as possible) in regulators discussions on XBRL Participation in XBRL International conferences Thierry Nederlandt, Head of Accounting and Consolidation (Dexia Group), member of the XBRL Advisory Council (XAC) of the IASC Foundation Chosen for a flexible XBRL approach/tool (instead of a regulatory approach/tool) allowing easy internal and external developing capabilities

14 14 Implementing XBRL for a cross-border banking group in Europe Dexia is already adapting its IT infrastructure in order to benefit, internally, from the advantages of an harmonized system. Fast close Comparability (Internal & External) Mutualization of knowledge Internal managerial information etc… The Present What does XBRL mean for Dexia ? Staying up to date on the current evolutions permits the group to stay aware of the future requirements that will be applicable in the next steps of implementation of XBRL and to already prepare the staff and the processes in order to enter easily in action for each update; Dexia also answers to draft papers and taxonomies from IASCF and other regulators to support the financial industrys specificities and our vision.

15 15 Implementing XBRL for a cross-border banking group in Europe Banks to create their own extensions or their own taxonomies? Referring to the US where 12 different taxonomies are already in use; considering the specificities of the industry. Or having particular extensions and dimensions to keep one single reporting line but also respecting industries specificities The Future What does XBRL mean for Dexia ? XBRL to be used by more and more financial reporting stakeholders: Stock exchanges Rating agencies Other… XBRL to become not only an external language of communication but also internal

16 16 What does XBRL mean for Dexia? Agenda Implementing XBRL for a cross-border banking group in Europe Experiences COmon REPorting FINancial REPorting IFRS Taxonomy Conclusion Introduction

17 17 What does XBRL mean for Dexia? Agenda Implementing XBRL for a cross-border banking group in Europe COmon REPorting Experiences COmon REPorting FINancial REPorting IFRS Taxonomy Conclusion Introduction

18 18 MIFID and Pillar II Reported in XBRL only in Belgium To be adopted by other EU countries ? Implementing XBRL for a cross-border banking group in Europe COREP (COmmon REPorting – Pillar I reporting under Basel II framework), could become a real nightmare… Starting from a single and unique European data model, regulators modified it to fit their own local needs Some banks (locally active mostly) were also arguing for modifying the European model Regulators also changed the definitions of concepts Resulting for crossborder banks in a nightmare, where the same reporting element may be computed and reported in many different ways (12 COREP for Dexia) Pure Regulatory Reporting But CEBS has now committed to deliver EU-wide reporting formats in 2012 for all credit institutions and investment firms located in the European Union Each regulator has changed the EU base taxonomy (red box) to fit with its needs, leading to several taxonomies and huge costs for EU global banks But will be adjusted to a REAL COmon REPorting in 2012 (?) Experiences : COREP

19 19 We need to be careful any proposed regulatory intervention itself does not lead to further regulatory failure. Two potential avenues for such regulatory failure are described below: Regulatory failure: risk with future evolution If the proposal sets harmonised requirements for information that is so high that compliance costs for firms are greater than benefits for the market as a whole; or Source: CEBS: Expert Group on financial Information, IA COREP May 5 th, 2009 Implementing XBRL for a cross-border banking group in Europe Experiences : COREP If the proposal requires a too low ceiling (key data are not collected, leading to net costs) regulators will be no longer able to identify some risks effectively, leading to an ineffective supervisory framework and, as a potential consequence, to a higher risk of financial instability.

20 20 COREP XBRL workflow Experiences: COREP Fermat CR worksheets CA-MR-OR worksheets Sharepoint Centralised Decentralised (If not under XBRL) XBRL tool Local Soft Assembling XBRL XLS Local format Other regulator Implementing XBRL for a cross-border banking group in Europe

21 21 What does XBRL mean for Dexia? Agenda Implementing XBRL for a cross-border banking group in Europe FINancial REPorting Experiences COmon REPorting FINancial REPorting IFRS Taxonomy Conclusion Introduction

22 22 direct filling Dexia taxonomy Pillar III taxonomy Implementing XBRL for a cross-border banking group in Europe Dexias different reportings FINREP taxonomy IFRS taxonomy Public Financial Statements Regulatory reporting (FINREP & Pillar III) Internal reporting Other legal reporting (tax, statistical etc.) Others Tax Experiences SEC Proposes Roadmap Toward Global Accounting Standards to Help Investors Compare Financial Information More Easily

23 23 Implementing XBRL for a cross-border banking group in Europe Link between the FINREP and our Financial Statements FINancial REPorting Experiences: FINREP FINREP (FINancial REPorting) regulatory reporting based on IFRS and having its own taxonomy Same issue for FINREP than for COREP (but limited to specific parts) FINREP taxonomy is based on the IASCF taxonomy The link between both taxonomies to be stronger and stronger As per the examples that will follow, a large part of the required information is, if not similar, very close.

24 24 As such, we build up a comprehensive file with all the information required by all the regulators No more need to input twice the same information The information is always available for every reporting entity These principles should be applied at all levels of consolidation The same information should be inserted only once FINREP: Basic principle Implementing XBRL for a cross-border banking group in Europe Experiences: FINREP

25 25 Counterparties FINREP: Basic principle Implementing XBRL for a cross-border banking group in Europe Experiences: FINREP Mapping of the reportings and related ECB comments

26 26 e.g. public sector "Non-commercial administrative bodies responsible to central governments, regional governments or local authorities, or authorities that in the view of the competent authorities exercise the same responsibilities as regional and local authorities, or non-commercial undertakings owned by central governments that have explicit guarantee arrangements, and may include self administered bodies governed by law that are under public supervision". Art 4 (18) of the CRD. FINREP: Basic principle Implementing XBRL for a cross-border banking group in Europe Experiences: FINREP Common definitions Used for different reporting in different states like COREP and FINREP in Luxembourg and Belgium Like the Equity instruments Including statistical impairment in FINREP but not in COREP, currently too much discrepancies and different definitions. Need for harmonization.

27 27 Links with FINREP (and F/S) Implementing XBRL for a cross-border banking group in Europe Example Experiences: FINREP

28 28 Links with F/S (and FINREP), partly provided by RMG Experiences: FINREP Implementing XBRL for a cross-border banking group in Europe Example

29 29 Experiences: FINREP Implementing XBRL for a cross-border banking group in Europe Example B/S CB B/S CEBS B/S

30 30 CSSF B/S Implementing XBRL for a cross-border banking group in Europe Experiences: FINREP Example B/S

31 31 CBFA B/S Implementing XBRL for a cross-border banking group in Europe Experiences: FINREP Example B/S

32 32 link from F/S to FINREP Experiences: FINREP Implementing XBRL for a cross-border banking group in Europe Example B/S

33 33 DEXIAS B/S : link with magnitude accounts Implementing XBRL for a cross-border banking group in Europe Experiences: FINREP Example B/S

34 34 Example 2: additional detail Implementing XBRL for a cross-border banking group in Europe Experiences: FINREP Example B/S

35 35 Implementing XBRL for a cross-border banking group in Europe Comments on the discussion paper Experiences: FINREP Discussion paper Financial Statements Presentation Not very suitable for the banking industry, like most of the IFRS, very oriented towards industrial companies. Should be more oriented towards a multi-tier service instead of only investor oriented. Very positive to impose a rigid classification as it improves comparability but this classification should reflect the realities of the different industries. We do not support presenting cash flows for the banking industry as it wont add any value. We do believe that the use of a global standard like XBRL could reflect the specificities of our industry and furthermore increase comparability between and inside the different industries. We believe that the use of extensions and dimensions in XBRL will provide both the structure and the flexibility asked by the stakeholders. Benchmarking !

36 36 FINREP Challenges Implementing XBRL for a cross-border banking group in Europe Experiences: FINREP Link with IFRS and banks financial statements National discretions: – CEBS guidelines not always clear – CEBS guidelines not always respected by member states – Changes in the business format may have insidious impact on the taxonomy (deleting a line changes the definition of the total – unless among which) – Additional information inconsistent with the CEBS format – Sometimes, regulators may give interpretations to IFRS rules Dimensions: – Preferred instead of tuples (link with IASCF?) – More standardization may be a benefit (exhaustive list of flows used throughout FINREP) – Definitions of some dimensions (counterparties => links with COREP, ECB, etc.)

37 37 Implementing XBRL for a cross-border banking group in Europe The Future: Using Dimensions ? Experiences: FINREP As per our chart of accounts, clearly related

38 38 What does XBRL mean for Dexia? Agenda Implementing XBRL for a cross-border banking group in Europe IFRS Taxonomy Experiences COmon REPorting FINancial REPorting IFRS Taxonomy Conclusion Introduction

39 39 Main Structure of the IFRS taxonomy The Taxonomy is following rule by rule the IFRS requirements Ease to find an item and the related disclosures No problem to find out relative examples or description rules Clear follow up of the updates of the regulation. No difficulties to highlights impacts of IFRS changes Implementing XBRL for a cross-border banking group in Europe IFRS Taxonomy

40 40 IT viewpoint of the XBRL taxonomy Implementing XBRL for a cross-border banking group in Europe IFRS Taxonomy

41 41 IFRS Taxonomy Implementing XBRL for a cross-border banking group in Europe Table Presentation of the taxonomy

42 42 Implementing XBRL for a cross-border banking group in Europe The use of the concept of dimension could help structure the information provided facilitating even more the understanding and the use of the provided information. Summary of the main comments relating to IFRS taxonomy IFRS taxonomy The issue of versioning has been raised by number of respondents Proposition to add formal descriptions of the concepts in order to avoid misunderstandings or divergent interpretations. Propositions to add extensions relating only to some industries or to propose different taxonomies for the different industries. Proposition to extend examples to all the possible situations, could be through dimensions, to allow other examples than the ones proposed by the IFRS wording. (Not all the reporting companies have biological assets…) Need to follow more the detail level required by the standards and the common practice. Need to translate the choices left to the reporting entities in the taxonomy (example: either in the notes or in the PFS)

43 43 What does XBRL mean for Dexia? Agenda Implementing XBRL for a cross-border banking group in Europe Conclusion Experiences COmon REPorting FINancial REPorting IFRS Taxonomy Conclusion Introduction

44 44 Implementing XBRL for a cross-border banking group in Europe How does it work ? XBRL tool MAPPING xls VALIDATION XBRL conversion Accounting Risk Tax Others Data sources IFRS Taxonomy

45 45 Feedback Experiences : COREP Implementing XBRL for a cross-border banking group in Europe On the softwares (XBRL focused) : Flexible enough to be adapted to all taxonomies To be adapted on a international banking IT structure Mapping is still the key Additional taxonomies can be quickly added On the taxonomies : Advantages of XBRL arent used Basis taxonomies are modified by local regulators A unique EU taxonomy is necessary XBRL is not mature enough to be internally used

46 46 Detail of problems faced by a transnational bank implementing XBRL Different systems People are reluctant to change Information retention instead of global info sharing (protectionism attitude due, partly, to the crisis) Implementing XBRL for a cross-border banking group in Europe Risk of additional national requirements => no additional requirements should be accepted, the member states should be ready to accept as is taxonomy as it is perfectly in line with IFRS requirements (and those should be accepted anywhere) Launch of the XBRL reporting Conclusion Risk of national protectionism from the different branches

47 47 Implementing XBRL for a cross-border banking group in Europe Experiences: FINREP

48 48 Implementing XBRL for a cross-border banking group in Europe Taxonomies need to be managed in an harmonized way i.e. Development of extensions has to be consistent with the parent taxonomy Need for Best Practices Its just started but already running… XBRL standards are now strong enough to be industrialized More and more authorities are adopting XBRL, it is becoming the standard XBRL offers a great opportunity to complete the work done by the IASB and the IFRIC on IFRS principles, as now XBRL may help to better compare information coming from different companies Furthermore, the use of XBRL does not require huge investments as most of the software are open-source But Conclusion

49 49 THANKS FOR YOUR ATTENTION Contacts Giancarlo Pellizzari Head of Prudential Policy Questions ? Implementing XBRL for a cross-border banking group in Europe

50 Paris, June 22nd to 25th, 2009 Giancarlo Pellizzari Head of Prudential Policy Dexia Group Implementing XBRL for a cross-border banking group in Europe


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