Liability Data Reporting: Lessons Learned from the 2016 data collection process and changes for the 2017 LDT template and collection process

Transcription

1 1/31/2017 Fifth Industry Diaogue Liabiity Data Reporting: Lessons Learned from the 2016 data coection process and changes for the 2017 LDT tempate and coection process Dominique Laboureix, Member of the Singe Resoution Board Axe Kunde, Head of Unit Resoution Panning and Execution

2 Agenda 1. Introduction 2. Lessons Learned from the 2016 LDT process > Data quaity > Deadines > Enhancements to the LDT > Further standardisation 3. Detaied changes to the 2017 Liabiity Data Reporting > Changes to the LDT itsef - Changes by reporting tabes - Taiored approach to reporting entities - Differentiated reporting requirements and consoidation perimeters - Hypothetica exampe > Reporting process > Timeine for the 2017 reporting process > Outook beyond Concusion 2

3 1. Introduction Granuar information on banks iabiities is necessary for resoution panning as we as for the decision on a resoution scheme and the impementation of resoution measures in a crisis. The need for granuar iabiity data is not imited to the execution of the bai-in too; it is aso criticay important in order to enabe the separation of iabiities reated to critica functions where the preferred resoution strategy is based on the sae of business or bridge bank too. In a crisis, banks need to be abe to report iabiity data on an ad-hoc basis in a standardised format; in order to save time and avoid mistakes, resoution authorities need to be abe to consume, process, and anayse the data received in a fuy automated fashion. To achieve this goa in the medium term, the SRB started to deveop a standardised iabiity data tempate (LDT) in 2015 and coected the data from a banking groups under its direct remit in 2016 for the first time. Based on feedback received from banks and its experience with the 2016 process, the SRB has improved the 2017 LDT and process whie keeping the overarching principes and structure impemented in 2016 unchanged. 3

4 Agenda 1. Introduction 2. Lessons Learned from the 2016 LDT process > Data quaity > Deadines > Enhancements to the LDT > Further standardisation 3. Detaied changes to the 2017 Liabiity Data Reporting > Changes to the LDT itsef - Changes by reporting tabes - Taiored approach to reporting entities - Differentiated reporting requirements and consoidation perimeters - Hypothetica exampe > Reporting process > Timeine for the 2017 reporting process > Outook beyond Concusion 4

5 Key features of the 2016 LDT process 22 February Pubication of the 2016 LDT and guidance 29 Apri Fina update of guidance pubished 15 June Reporting deadine for 2 nd waive of banks 15 Apri End of Q&A process 15 May Reporting deadine for 1 st waive of banks The SRM coected information from 143 banking groups under its remit. Taking into account the reporting of different entities, at individua and consoidated eve, a tota of approximatey Exce fies were coected. The coected data was used in the deveopment of resoution pans, in particuar for assessing banks oss absorbing capacity; yet aso from a poicy perspective, anaysing the submissions from a horizonta perspective. 5

6 Lesson 1: Data quaity needs improvement When announcing the 2016 data coection the SRB was aware that banks were not producing granuar iabiity information under existing reguatory or financia reporting requirements. SRB therefore anticipated that banks woud have to identify reevant data sources manuay; SRB aso acknowedged that the reporting deadines were reativey tight. To provide banks an orientation for prioritisation, a coour code (red/amber/green ces) was provided. SRB aso conducted an extensive Q&A process in order to assist banks. SRB observed arge differences in the quaity of the data submitted by banks, in terms of both competeness and accuracy. On average, smaer banks outperformed arger banks. Overa, the information contained in the LDT proved usefu, not ony for anaysing the overa oss absorbing capacity and its distribution within banking groups. Where data quaity was insufficient, drafting resoution pans has been more chaenging. Going forward, data quaity wi be a key point of attention, supported by a technica soution. 6

7 Lesson 2: Reporting deadines must be respected In 2016, banks were given between 3 to 4 months for submitting the LDT, depending on whether the group requires the estabishment of a resoution coege or not. This timeine was aigned to the 2016 resoution panning work programme, which prioritised the finaisation of resoution pans for banks with resoution coeges. However, in many cases the deadines were not respected: > For some banks, reporting was ony received after the deadines, or the reports were submitted ony partiay. > In other cases, the data quaity was very poor and required severa resubmissions. > Ony a minority of banks deivered sufficienty compete and accurate information with the first submission. The SRB was aware that banking groups were requested to report granuar information on iabiities for the first time; however, the deay in submissions caused undue pressure on the overa timeine: > IRTs had to spend too much time on data vaidation and had insufficient time for data anaysis. Going forward, the SRB wi activey monitor and benchmark banks abiity to provide compete and accurate reports. Since the 2017 LDT was pubished in December, banks have more time and are encouraged to submit fies ahead of the deadine, to ensure they can correct any errors or omissions without breaching the deadine for fina submissions. 7

8 Lesson 3: Some imited changes to the LDT are required When announcing the 2016 LDT, the SRB emphasised that the tempate was not in its fina format and that banks shoud expect some deveopments over coming years. The main identified shortcomings of the 2016 LDT are as foows: > It proved cumbersome for IRTs to identify and anayse the exposures between entities within the group. > Requesting ony a singe consoidated report from the EU parent entity proved insufficient; taiored reports for resoution entities on a sub-consoidated basis are needed. > The number of reporting entities coud be reduced. As a resut, changes have been made to the 2017 LDT both in terms of content and ega entity scope. The purpose is twofod: > To reduce the reporting burden on banks, where possibe, whie > Taioring the information request towards the needs impied by the resoution strategy (SPE/MPE). Supposing there is no reguatory change in this area, banks shoud start the deveopment of an IT soution for reporting iabiity information on the basis of the 2017 LDT. Whie further imited changes to the LDT can be expected for 2018, banks need to maintain fexibiity, but the core buiding bocks of the tempate appear sufficienty stabe to start the IT deveopment work. 8

9 Lesson 4: Further standardisation of the LDT is necessary in order to enabe automated processing and anaysis When aunching the LDT process in 2016, the SRB was aware that data vaidation and systematic evauation woud need to be performed manuay and announced its intention to deveop a technoogy soution. In 2016, the IRTs and the banks themseves have spent considerabe time and resources on vaidating submissions: > Foremost on a consoidated basis, as a consequence of the horizonta poicy to discuss MREL at this eve. > Whie vaidation checks that coud be performed were imited due to the nature of the report (i.e. priority coour coding, threshods on granuar data, imited externa data sources to compare against, etc.). In addition, the SRB s abiity to conduct horizonta anaysis and to benchmark banks was imited: > Some banks changed the ayout of the LDT, which made horizonta anaysis difficut and often required re-formatting. > Many ces aowed inputs in different formats (e.g. percentages instead of numbers), which resuted in errors that had to be corrected manuay. In 2017 banks wi again be requested to submit the LDT in Exce, but SRB is deveoping the technica infrastructure to support the coection, vaidation, and anaysis of the data. For this, the eve of standardisation had to be increased. 9

10 Agenda 1. Introduction 2. Lessons Learned from the 2016 LDT process > Data quaity > Deadines > Enhancements to the LDT > Further standardisation 3. Detaied changes to the 2017 Liabiity Data Reporting > Changes to the LDT itsef - Changes by reporting tabes - Taiored approach to reporting entities - Differentiated reporting requirements and consoidation perimeters - Hypothetica exampe > Reporting process > Timeine for the 2017 reporting process > Outook beyond Concusion 10

11 Changes to the LDT itsef Coour coding: > As highighted from the start, the coour coding was introduced in ight of tight deadines and as a way of prioritising the first production of granuar data. > For the 2017 report, entities are expected to provide the data for a appicabe ces. Threshod vaues for the tabes for securities, deposits, derivatives, SFT, and other financia iabiities have been removed, to aow reconciiation with aggregate data in the summary tabe. The number of backened ces has been reduced to aow reporting where possibe. Free text fieds have been repaced wherever possibe by predefined ists of vaues to be reported. Format requirements have been more ceary provided in the Exce-fie as we as in the guidance. These changes were made to remove ambiguities and aow for automated processing of the fies. The SRB wi aunch a pre-recorded webinar on 1 February. A functiona maibox for technica questions on the report and guidance has been created as of 18 January. 11

12 Changes to individua reporting tabes T Liabiity Structure > Additiona detais reated to the own funds instruments > Added information on off-baance sheet exposures > Added information on tota accounting equity T Own Funds > Aignment with the refined ECB SREP methodoogy T03.0x - Intragroup Liabiities & Guarantees > Identification of intragroup iabiities in a separate tempate > Additiona detais on the intragroup guarantees (received and provided) T04.00 to T Securities, deposits, financia iabiities, derivatives and secured finance > Changes are imited to simpe carifications 12

13 Taiored approach to identifying reporting entities In 2016 the SRB wanted to obtain a cear picture of groups externa and interna funding structures for a ega entities that coud potentiay be reevant for resoution panning, i.e. a group entities incorporated in the European Union and coecting deposits, issuing securities or trading derivatives. For 2017, the reporting scope has been aigned to the existing ega framework, but aso taken into account some important deveopments in the recent egisative proposa by the EU Commission for amending the BRRD and impementing the TLAC standard in the EU. A first step reates to the ega status of the entity, whether or not it is in scope of the BRRD and SRMR. The second step identifies the resoution entities, to which resoution measures are expected to be appied under the preferred resoution strategy (PRS). In the fina step, the reevant subsidiaries within a resoution group are determined, i.e. whether the entity: > Provides critica functions (CFs); and/or > Represents more than 5% of either RWA, everage exposure or tota operating income of the (resoution) group. IRTs have the fexibiity to adjust the reporting scope, e.g. where the entities with CFs have not been identified or the PRS has not yet been decided. 13

14 Differentiated reporting requirements and consoidation perimeters Reporting requirements have been aigned with appropriate eves of consoidation: > Individua reports for a resoution entities and their subsidiaries which are reevant ega entities for the resoution group. > (Sub-)consoidated reports for resoution entities on the basis of a subsidiaries incuded in the prudentia consoidation perimeter. > New resoution group reports, which incude a subsidiaries of a resoution entity, uness they beong to a different resoution group or the IRT considers that norma insovency coud be appied under the PRS, if necessary: - If insovency is considered as an option, the submission of an LDT is needed to aow IRTs to assess the impact on the rest of the resoution group - These new reports are expected to aow IRTs to gauge the baance sheet perimeter and risk exposures of entities that must be recapitaised in resoution. The requirement to report granuar information on individua iabiities has aso been aigned with the preferred resoution strategy: > Liabiities and guarantees (received and provided) from other group entities need to be provided by a entities and for a eves (individua, sub-consoidation and consoidation). > Externa iabiities need to be provided by entities identified as a point of entry in the preferred resoution strategy and on an individua basis. IRTs have aready started to identify the ist of reporting entities and reporting requirements. 14

15 Exampe of taiored reporting requirements for a hypothetica MPE group The group has four resoution entities (A, B, E, and F), which need to provide granuar iabiity data on an individua basis. Entities A, B and F are parent entities and therefore aso need to submit a (sub-)consoidated report based on the prudentia consoidation scope, which is, however, imited to the iabiity structure, own funds and intragroup information. Entity B aso needs to provide a new resoution group report, on a consoidated basis with entity C, but not D, given that the IRT considers entity D coud go to insovency. Subsidiary D needs to report an LDT on individua eve, even if it is not an RLE, because it is considered a candidate for insovency. Subsidiary G is assumed to be an RLE, therefore required to report on an individua eve. Entity C is not a reevant ega entity (i.e. sma and no critica functions) and hence, no reporting is requested. 15

16 Reporting process (1/2) SRB wi vaidate iabiity data submissions through XBRL Data coection, storage and subsequent anaysis wi be automated within the SRB. To achieve this important goa, the SRB wi pubish an XBRL (extended Business Reporting Language) taxonomy, incuding vaidation rues, in ine with common practice for FINREP and COREP reports. The need to make the report XBRL compatibe requires a significant amount of mere technica changes to the format of the previous report (e.g. row and coumn references). Notwithstanding the XBRL impementation at the SRM side, and provided the sti short timeframe for the 2017 process, institutions are required to send the reports in the format of an Exce fie. The Exce fies wi have to remain in the exact same format as provided by the SRB on its website to enabe a successfu submission (XBRL vaidation) SRB pans to pubish the XBRL taxonomy and vaidation rues by 31 March to aow those institutions that have the capacity to impement it, to check that the conversion of their reports to XBRL wi be successfu. However, this is not mandatory and in any case, a institutions are required to submit Exce fies this year. 16

17 Reporting process (2/2) but in 2017 a banks are sti requested to submit data in Exce. 1 5b 2 NRA 3 4a 4b 5b 1. The NRA informs Institutions that the data coection process has begun and that Exce reports can be sent. 2. The SRB informs the NRA that the Data Coection Porta (the Porta) is open. 3. The Institution creates the report in Exce and sends it to the NRA. Institutions that have the capabiity to impement the XBRL taxonomy shoud test that the.xsx tempate can be converted successfuy in order to mitigate the need for resubmissions. 4. The NRA sends the report to the SRB. Either: a. The NRA converts the Exce fie to XBRL ocay before submitting to the SRB Porta; or b. The NRA submits the Exce fie to the SRB Porta, which converts it into XBRL. 5. Data Vaidation: a. If the XBRL fie is vaidated, additiona checks on accurateness, competeness and consistency wi be performed by NRAs/SRB; or b. If the XBRL fie is invaidated then the NRA receives an error report and contacts the institution for further detais/correction of the report before re-submission (see points 3 to 4b above). 17

18 Timeine for the 2017 process Q Anaysis of 2016 data and Q&A with a view to update the report 18 October Meeting with EBF 18 January 2017 SRB maibox opened for direct questions 1 February Pubishing of a prerecorded webinar 1 March Fixing of the fina reporting requirements for a entities 15 May Utimate deadine to submit reports 11 October Draft reporting format and guideines shared with EBF 13 December New report and guidance pubished on the SRB website 30 January Fifth industry diaogue 15 February SRB maibox cosed, Q&A process to be continued through the responsibe NRA 31 March Pubication of the fina XBRL taxonomy on the SRB website 18

19 Outook beyond 2017 The SRB s medium term goa is to estabish a reporting standard for iabiity data that is equay usefu for resoution panning, informing resoution decisions, and impementing resoution measures. A high degree of standardisation is required to aow automated data processing whie minimising ambiguities and errors. For the next coupe of years the SRB wi continue to ask for year-end reports from a banking groups, in ine with the annua resoution panning cyce of the BRRD, whie further refining the tempate and aigning the reporting deadines with FINREP and COREP, in a phased approach: > Report on end of 2016 data due by 15 May 2017; > Report on end of 2017 data due by 30 Apri 2018; > Report on end of 2018 data due by 31 March Known drivers that coud require further deveopments of the LDT: > Operationaisation of resoution toos, incuding both bai-in and transfer strategies that require the ad hoc separation of iabiities associated with critica functions. > Standardisation of MREL eigibiity criteria through the CRR. > MREL reporting and discosure requirements as per EC egisative proposa and EBA mandate: SRB wi continue to engage and wi aim to ensure that reporting and discosure requirements can easiy be aggregated from the granuar information in the LDT. > SRB cooperation with other EU (resoution) authorities with the aim of avoiding dupication and reducing reporting burden on banks. SRB remains committed to create a stabe reporting format to the maximum extent possibe. The deveopment of an XBRL taxonomy and interna SRB-systems are key steps towards this goa. 19

20 Agenda 1. Introduction 2. Lessons Learned from the 2016 LDT process > Process > Data quaity > Deadines > Change management 3. Detaied changes to the 2017 Liabiity Data Reporting > Changes to the LDT itsef - Changes by reporting tabes - Taiored approach to reporting entities - Differentiated reporting requirements and consoidation perimeters - Hypothetica exampe > Reporting process > Timeine for the 2017 reporting process > Outook beyond Concusion 20

21 Concusion Summary of key messages for 2017 Despite some shortcomings, the 2016 LDT process was a success and the reporting format has proven to be broady appropriate. Important feedback from industry participants and experience gained from anaysing the data have been used to enhance the tempate. In 2017 the SRB expects banks to demonstrate improvements in data quaity and wi start to benchmark banks performance: data competeness and accuracy are criticay important to inform sound resoution decisions and a smooth impementation of resoution measures. Data formats and deadines must be respected: by 15 May SRB expects a banks to have deivered LDTs that successfuy meet XBRL vaidation rues. In 2017 SRB requests a banks to report LDTs in Exce, but from 2018 onwards SRB generay expects banks to be abe to report in XBRL format. In the medium term a banks need to demonstrate their resoution readiness by deveoping the capacity to report the LDT on an ad-hoc basis for any business day of the year. To achieve this goa, a banks are expected to start the deveopment of IT soutions in 2017 whie retaining sufficient fexibiity to support further changes to the LDT in coming years. 21

22 THANK YOU For more information, pease contact:

23 Annex 1 Excerpt from the 2 nd Industry Diaogue 23

24 Annex 2 Lega Framework Artice 13.1 of the BRRD sets out the requirements for entities to report the information required according to artice 11 of the BRRD The Commission Impementing Reguation (EU) 2016/1066 of 17 June 2016 provides a minimum set of information that is required for resoution panning purposes Taking into account this minimum set of information (i.e. Annex V to the Impementing Reguation), other requirements identified by the SRB, as we as the requirements in artice 11.2 of the BRRD, the SRB has deveoped the Liabiity Data Report and intends to request it on a periodic basis 24