1. Leveraging XBRL for Basel II
Daniel D’Amico
XBRL Int Basel II Working Group Chair
IBM Business Consulting Services, Risk and Compliance
Boston, April 27, 2005

2. Agenda The three real pillars of Basel II
XBRL towards aligning the pillars
XBRL Basel II plans

3. The three Pillars of Basel II
Minimum Capital requirements
Supervisory Review Process
Market Discipline

4. The three Pillars of Basel II
The regulators
Basel II
The Public
The Banks

5. The public
Shareholders, Investors, ECAI, Analysts, Depositors, Investigators…. all want to have information about the risks a given bank is taking, the distribution of their banking books, the riskiness of their portfolio…..
This has to be true at an international level given cross border activities of the average banking group
It is necessary to:
Develop common definitions (cross border)
Use common/global standard
Obtain timely information
Low cost of acquisition

6. Meaningful and useful public disclosure is can be reached if…
Common Definitions
Common Global Standard
Timely Information
Low Cost of acquisition

7. The three Pillars of Basel II
The regulators
Basel II
The Public
The Banks

8. The Banks
“…Banks in revolt against ‘regulatory exuberance’, Bankers face unprecedented volume of regulation. Proposal to establish wise men’s group to provide a new way forward .…”
Global Risk Regulator, April 2005
Banks in europe:
-Capital Requirements Directive (CRD)
-Variety of directives associated with the Financial Services Action Plan,
-Market in Financial Instruments Directive (MiFID) and the
-Markets Abuse Directive (MAD).
US Banks:
Basel II
Sarbanes-Oxley Act,
The Patriot Act, intended to combat money laundering and terrorist financing
Global banks such as Citibank and HSBC have to report to hundreds of regulators. HSBC chairman John Bond says his bank now has more than 370 regulators, while complying with regulatory obligations around the world costs it $400 million a year. There are worries, too, about the reputational risk that may arise from any compliance and control failures, a risk that is compounded by overlapping regulations.

9. Regulatory reporting from many local regulators
e.g. International
Bank
Reporting to:
-Canada
-US
-UK
-France
-Spain
-Italy

10. Many regulators, but also many requirements
Some challenges of Financial Institutions:
Slice and dice information
Similar information but not the same
Ad hoc processes
Reactive to evolving regulations
Thus difficult to align internal reporting processes
US GAAP
UK local GAAP
IFRS
Multiple requirements
from local regulators
..but also different
requirements

11. With Basel II, Banks are faced with concurrent challenges
Changes in Processes, Governance, Systems and Data
Complex integration requirements
Organisational: i.e.Business Unit/Group,
Functional: i.e. Finance/Risk
Systems and Data: i.e. Product/Collateral systems)
Data consolidation and integration issues
Co-existance of other projects/regulatory frameworks
Multiple reporting requirements
…and finally Business as usual

12. Reporting Challenges Internal view vs. external view of the data
Timing for model development
Internal reporting vs. external reporting
From data centric to information centric
Conflicting drivers
Consolidating/Prime regulator vs other regulators
Who and what?
What is the different between public disclosure and regulatory reporting?

13. The problem in the Basel II consultation process
Basel II requirements and reporting rules
Basel II requirements and reporting rules
Central Banks/ Banking Regulators
Basel II requirements and reporting rules
Central Banks/ Banking Regulators
Central Banks/ Banking Regulators
Central Banks/ Banking Regulators
Basel II requirements and reporting rules
Bank for International
Settlements
Basel II requirements and reporting rules
Basel II requirements and reporting rules
Office of Superintendent
Of Financial Institutions
Basel II requirements and reporting rules

14. Which translates in a lot of work for banks!!
Basel II requirements and reporting rules
Basel II requirements and reporting rules
Basel II requirements and reporting rules
Basel II requirements and reporting rules
“HSBC chairman John Bond says his bank now has more than 370 regulators, while complying with regulatory obligations around the world costs it $400 million a year”
Global Risk Regulator Apr 2005
Basel II requirements and reporting rules
Basel II requirements and reporting rules
Office of Superintendent
Of Financial Institutions
Basel II requirements and reporting rules

15. Banks are under pressure
Internal
External
Mapping internal models to external world
Use test across the organisation
Basel II objectives vs. Risk Mgmt strategy
What is the public disclosure framework?
How much granularity do I want to give to the public?
Bank
How many regulators?
Will the regulators deliver to the Basel II promises of cross border exchange of information
XBRL can relieve some of the pressure

16. Is this a crazy idea?
Would it not be nice to have one set of requirements no matter who I report them to?
Yes it is a Crazy idea!!
The list of whys would be endless
Global
Public Disclosure Taxonomy
Global
Regulatory Reporting Taxonomy

17. …but
CEBS (Committee of European Banking Supervisors) have done so for EU with Common Reporting (COREP)
Other economic areas could follow these footsteps
This would substantially reduce the burden of the regulated as:
International banks are mainly active within an economic areas
Any level of commonality would reduce costs

18. The three Pillars of Basel II
The regulators
Basel II
The Public
The Banks

19. So what are the regulators doing to meet these challenges?
Key Challenges
Manage expectations of regulated
Co-existence of jurisdictional definitions and alignment to other regulators
Contain costs for regulated (and themselves)
Show clarity and leadership

20. Agenda The three real pillars of Basel II
XBRL towards aligning the pillars
XBRL Basel II Plans

21. XBRL for Basel II, how?
Internal taxonomy extensions or mapping to internal data models
Public Disclosure taxonomy
All this can only happen with clear, cross border and communicated common definitions from the Regulators
Jurisdictional Regulatory reporting taxonomies based on common definitions
Common definitions (from the regulators)

22. Agenda The three real pillars of Basel II
XBRL towards aligning the pillars
XBRL Basel II plans

23. XBRL Basel II Working group objectives
Liaison working group
Fosters the adoption of XBRL for regulatory reporting worldwide
Does not build taxonomies
Does not want to do the job of the regulator
Does not want to set policies
It is an XBRL Int working group, not a national one, nor a European working group

24. XBRL Basel II today
XBRL Basel II working group is supporting COREP in expressing definitions in XBRL
XBRL Basel II working group is liaising with other regulators worldwide to build awareness on the use of XBRL for Basel II
Will support the development of disclosure taxonomies if necessary

25. XBRL Basel II at national level
Different jurisdictions have created sub working groups for Basel II
In EU - CEBS is very clear that mandates will be at national discretion
As such any ‘local’ reporting will have to be supported by localised taxonomies hence the need of a local Basel II working group

26. Thank you Daniel D’Amico XBRL Int Basel II Working Group Chair
IBM Business Consulting Services, Risk and Compliance
Boston, April 27, 2005