EBA publishes corrections to XBRL reporting taxonomies and confirms reference dates

The European Banking Authority (EBA) has published corrective updates to two versions of its XBRL taxonomies for supervisory reporting, correcting technical errors in the implementation of some validation rules.

Following the publication by the European Commission of the relevant amendments to the Implementation Technical Standards on supervisory reporting, the EBA also confirms the first applicable reference date for the 2.4 version of the taxonomy as 30 September 2016.

Taxonomy 2.4 is the first to include LCR under the delegated act and so firms will start to use this rather than the current additional XML method required by the PRA.

ALMIS International will ensure our Regulatory Reporting solution is compliant with the latest 2.4 version.

Reference Dates

COREP Taxonomy Updates

There have been some recent press releases issued by the EBA regarding updates to the Data Point Model and the XBRL Taxonomies according to the Implementing Technical Standards (ITS) on Supervisory Reporting.

The first of these is a corrective update, taxonomy 2.4.1, which is to be used in place of the previously published taxonomy 2.4. This taxonomy will apply for submissions with reference dates 6 months from the point of their publication in the Official Journal- provided that this is prior to December 2016. At the time of writing, there has been no publication relating to taxonomy 2.4 or 2.4.1 in the Official Journal.

The second press release is related to the publication of taxonomy 2.5. It is explicitly stated that this will be used for reference dates from 31 December 2016 onwards.

In the interim, the active taxonomy continues to be 2.3.1.

We will continue looking out for further news on the situation, and liaise with contacts in the industry in order to keep our clients updated with the most recent regulatory developments.

European Commission settles approach to ALMM (additional liquidity monitoring metrics) reporting and confirms timing

Long awaited Commission Regulations settling the approach to the new ALMM reporting regime have been published. As previously thought the regulations drop Maturity analysis (for the time being anyway).

The reporting regime will require certain institutions to submit the required reports monthly (with April 2016 as the first month for which information is to be reported); however for most UK firms the reporting requirement will be quarterly.

Reports to be submitted will cover: Concentration of funding by Counterparty, Concentration of funding by Product Type, Prices for various lengths of funding, Roll-over of funding and Concentration of Counterparty Capacity by Issuer/Counterparty.

A key challenge will be the need for firms to collect data on new funding and rollovers.

We continue to liaise with the EBA on details regarding reporting deadlines as well as the content of submissions when reported on a quarterly basis. We are continuing to monitor for any update from the PRA related to this statement on ALMM.

Liquidity Under CRD IV – What can we do to mitigate the burden?

Liquidity Under CRD IV ––63 banks and building societies attend webinar

Feedback used in response to CP 27/14

Banks and Building Societies well understand the need to be fully informed of any proposed changes to key regulatory frameworks such as CRD IV. Liquidity has become a primary driver under the new regulations and LCR reporting and stress testing will have significant impact, especially on smaller, more simplified firms.

To help bring clarity to the proposed changes and to facilitate debate around the key issues, Jeremy Palmer (Head of Financial Policy) from The Building Societies Association (BSA) in conjunction with ALMIS International, hosted a highly informative and interactive webinar on Wednesday 18th February, attended by 63 delegates.

The webinar explained the proposals and their likely impact but also discussed BSA amendments to mitigate these changes and how firms can effectively comply by using a fully automated and integrated system such as ALMIS.

Here’s a brief summary of the key issues and highlights of the debate.

What’s the history?

Basel proposed a liquidity regime in late 2010 which the EU hard wired into CRD IV– quantitative pillar 1, pillar 2 and reporting under COREP. This was supplemented by TS drafted by the EBA and now, CRD IV plus TS will replace the PRA regime in BIPRU 12. CP 27/14 explains how PRA will make the transition.

Headline Proposals in CP 27/14

The current simplified regime will be revoked with the LCR Glide path moving from 80% in October 2015 to 100% by January 2018.

The capacity to report the LCR on a daily basis will be included and the reporting burden will increase further as the FSA 047/048 will be maintained for another two years.

Changes to categorisation will mean that pre-positioned non-HQLA cannot be in included in LCR/Pillar 2 calculations but can be included in OLAR.

All firms but particularly simplified firms will need to increase the level of stress testing

What’s the likely impact on Banks & Building Societies?

Liquidity calculations and reporting will become much more onerous and complex and the number of liquidity stress risk drivers will increase – especially for simplified firms.

Using ALMIS to meet the challenge – automation is key

Regardless of the final detail of the proposed changes, there will be an increase burden in the complexity, volume and frequency of calculating and reporting the LCR and stress testing liquidity. ALMIS International has created a modular, integrated system that deals effectively with the proposed changes by:

  • Auto-population of the LCR

  • Utilising the same data sets for liquidity stress testing and regulatory reporting

  • Capability to understand liquidity risk drivers

  • Forward looking and dynamic analysis

  • Combine capital and liquidity stress test

For a video of the webinar presentation and accompanying slides contact Jenna Haston on 0131 452 8898

New CRD IV Liquidity rules are going to be a challenge for both small and large banks

We are beginning to see some clarity for liquidity under CRD IV. The PRA have recently published a consultation paper CP27/14 and this is based on the EU Delegated ACT published on 10th October 2014.

So what does all this mean for Banks and Building Societies?

  • LCR reporting – the detail of COREP LC is an intricate reporting requirement and differs in complexity from the FSA 047 and 048. All banks need to produce BOTH and the PRA look like demanding the capability to report the LC daily. Firms will need to maintain reporting of FSA 047 and FSA 048 for up to two years after the introduction of the full suite of COREP liquidity returns in 2015.

  • LCR reporting is to become mandatory also for UK Branches of third country firms and UK designated investment firms.

  • Revoke BIPRU 12. This includes revoking the simplified ILAS regime and the requirement on firms to undertake standardised stress testing. Chapter 1.14 says the PRA recognises that the removal of the simplified ILAS modification will increase the compliance costs for those firms that previously benefited from it. Simplified ILAS firms such as small banks and building societies will also need to apply the same stress testing approach as other firms.

  • Carry forward the broad principles established in BIPRU 12 into the new regime.

  • Apply a transition to 100% LCR on 1 January 2018 in the following steps: an 80% requirement from 1 October 2015, rising to 90% on 1 January 2017. Table A at chapter 2.7 shows the PRA is applying higher percentages than the minimum path set down by Article 460 of the CRR.

  • Carry forward existing add-ons not covered in the LCR as the new Pillar 2 add-ons, until each firm’s next liquidity review.

  • Require that firms integrate fully the operational requirements outlined in Delegated Act Article 8.

  • Propose that if pre-positioned assets are not eligible for inclusion in the HQLA buffer, they cannot be used to meet the PRA’s quantitative liquidity guidance.

ALMIS is particularly well placed to assist firms meet these regulations. We have a completely automated approach to producing the LCR and NSFR from source data and this will be particularly valuable in helping firms meet the daily requirement. Our sticky rules table is highly configurable and can be set up to meet the exact requirements of the Delegated ACT. Also from the same source data firms can set up and run a whole series of idiosyncratic and market-wide stress test. All this can also be forward looking to firms can see what their LCR is in say 7 days’ time or what the stress tests might look like as a result of its business and financial plans.

For further information please visit www.almis.co.uk or contact Jenna Haston to arrange a demonstration.

Spotlight on Liquidity – Liquidity Coverage Ratio (LCR)

ALMIS enhances Liquidity Module with powerful Sticky Rules Table

Basel III set the global minimum standard for liquidity. The EBA (European Banking Authority), with the new COREP regime, introduced specific interpretation based on globally defined, detailed reporting requirements. These will be introduced as a Pillar 1 requirement in 2015, eventually replacing BIPRU 12.

Liquidity coverage requirements specify that firms should maintain liquidity buffers which are adequate to face any possible imbalance between liquidity inflows and outflows under gravely stressed conditions over a period of thirty days.

Part of the new guidance stipulates the need for a greater degree of granularity of reporting of retail outcomes under stress conditions to ensure LCR are met. Firms now need a powerful Liquidity system that can accurately categorise risk factors and calculate complex combinations to simulate various stress scenarios. They need to determine the optimal liquidity coverage (LC) for stress conditions ranging from grave to ‘business as usual’.

ALMIS Sticky Rules Table for the Liquidity Module

The ALMIS Liquidity module has been enhanced ahead of the regulatory deadline to include powerful ‘Sticky Table’ logic to enable firms to quickly and reliably calculate retail outflows in order to comply with EBA guidelines for LCR.

The Sticky Rules Table will analyse and calculate (according to the guideline Categories 1, 2 and 3), combinations of High Risk Factors (HRF) and Very High Risk Factors (VHRF) including:

  • Customer view (including country of residence, value of deposit, currency, strength of relationship)

  • Product view (including distribution or product characteristics)

  • Maturity view for notice and fixed accounts

LCR and Regulatory COREP Reporting

Our system provides:

  • Auto-population of Liquidity Coverage Templates for COREP to save time and resources and help reduce data errors

  • New, enhanced report for Liquidity Coverage

  • More detailed analysis of Deposit by Customer

ALMIS LCR to optimise liquidity Management

Whilst comprehensive LCR is essential for regulatory reporting, it is also a vital tool in the management information strategy of any banking institution. The ability to conduct analysis under different stress scenarios will provide management teams with more accurate management information to create the appropriate level and type of liquidity for both compliance and profitability.

For more information on LCR and the ALMIS Liquidity module contact info@almis.co.uk

Spotlight on Liquidity – Joe Di Rollo’s presentation at the BBA Annual Liquidity Conference 2014

ALMIS International were the Headline Sponsor for the BBA’s Annual Liquidity Conference held in London at the end of April.

Joe Di Rollo of ALMIS International presented on the key topic of “Implications of BASEL III and COREP on a Bank’s organisational structure and IT strategy”

To view selected slides from Joe Di Rollo’s presentation at the BBA Annual Liquidity Conference 2014 go to click or for a copy of his full presentation email us at info@almis.co.uk

For more information on the BBA

EBA’s interactive single rulebook available online

The EBA has published an excellent online tool, cross-referencing all the technical standards to the Level 1 texts and any official Q&A.

To access the “Single Rulebook” click

ALMIS Automates Large Exposure (LE) Reporting – helping firms overcome the increased demands of LE Reporting for COREP

Fact: LE reporting for the new COREP regime is detailed, demanding and complex

Fact: LE reporting now consists of 6 different reports

Fact: Firms should report two different measures of LE

  • Each LE being more than 10% of eligible capital

  • The 10 largest exposures by type, value and maturity

Fact: LE reporting needs to separately show connected groups of counterparties, NACE codes and legal entity identifiers (LEI’s)

This all adds up to a significant reporting burden for any finance department!

Fact: Using ALMIS Capital Adequacy and COREP Reporting can significantly reduce this burden

Firms have previously benefited from using the ALMIS system (Capital Adequacy Module) to monitor, control and report LE. Our enhanced Capital Adequacy and Reporting capabilities give them the power, flexibility and control to automate this process – now even more important to address the more detailed and complex reporting.

Firms need to use the same data to calculate LE as for CR (Credit Risk). The ALMIS system seamlessly integrates and automates CA, CR and LE COREP returns using the Capital Adequacy module. This helps firms by:

  • Saving time and resources

  • Reducing input errors

  • Creating a single consistent version of the data

  • Providing a more comprehensive audit trail

  • Giving confidence to the regulators by using a controlled and integrated solution

For more information on how ALMIS can help reduce your LE reporting burden, contact info@almis.co.uk

Why Synergy matters – getting the best from your ALM and Regulatory Reporting Systems

 

Back in 1992 when ALMIS International was founded, spreadsheets were very much the norm for calculating balance sheet risk. The need to do calculations at all was a ‘nice to have’ but certainly not an essential part of managing a Building Society. The regulatory financial landscape has changed considerably since then, both in terms of the technology toolbox now available but also in terms of the need for comprehensive, reliable, auditable and reportable analysis.

Building Societies now need to analyse their financial risk profiles in numerous ways, providing their Executives and Boards with accurate information on current and forward looking positions to help them proactively monitor and plan capital and liquidity requirements, profitability and interest rate risk. Not only is this information crucial for managing a sustainable business model it is now part of a complex regulatory regime. ALMIS has provided FSA reporting capability since 2010 but with the implementation of CRD IV and the subsequent demands of COREP and FINREP, the advantages of an IT platform for both ALM and Regulatory Reporting are evident.

 

The ALMIS regulatory reporting module has been extensively developed to include an effective and time saving solution for FSA, COREP, FINREP and BoE reporting providing effective workflow management, validation routines, comparatives and full audit trails to allow for efficient management and full compliance. But all this reporting data can also be used to monitor and manage financial risks and help manage the balance sheet in a forward looking way.

 

The new regulations are placing significant strains on finance and treasury departments in Building Societies. As a result, there is a need to be as efficient as possible in how information is processed and interpreted, together with a requirement for consistency with assumptions and data models used to produce the analysis.

 

Whist some Building Societies have installed a combination of dedicated ALM software for asset liability management and separate regulatory reporting tools, there is a growing trend towards synergy – utilising the same IT platform for both activities. This consolidation of departments and management of regulatory reporting and balance sheet as an integrated activity is proving to be a successful strategy in managing resources and the complexity of data.

 

The reporting needs of prudential regulators and senior management are not so far apart and the detail of the new regulatory reports now required means that the same regulatory data can be used for balance sheet management purposes.

 

So the question even for the very largest Building Societies is, “Why have separate, disconnected products for these activities when they can be effectively delivered in one system”?

 

The advantages of a single system for Balance Sheet Management and Regulatory Reporting:

 

– A single version of the facts

– Increased scrutiny and therefore reliability within a single version

– Consistency of the assumptions applied

– Time savings loading and reconciling data

– Understanding the impact decisions have and the interplay between liquidity and capital, profitability and interest rate risk

– Building both the regulatory and economic requirements into forward plans

With increasing complexity of data, the growing need for proactive future planning and the continual demands of regulation, the adopters of a system that manages, monitors and reports in a fully integrated and auditable way must surely give those Building Societies a distinct advantage.

Liquidity Coverage (LC) Ratio Reporting for CRD IV

On Tuesday 18th March, ALMIS International hosted a webinar explaining liquidity reporting under CRD IV and particularly the new liquidity coverage (LC) reports and ratio. This was a popular event and was attended by over 40 ALMIS banks and building societies. Here’s a summary of what we discussed, together with feedback from our participants.

The Regulatory Perspective

Basel III is a global voluntary regulatory standard on bank capital adequacy, stress testing and liquidity risk. The BIS, under BASEL III, has published for the very first time, a global standard for liquidity management.

Based on this CRD IV includes two liquidity ratios and consequently, the LC return will be the first return to be submitted under COREP – due by 30th April 2014 for March 31st data.

In December 2013 the EBA published new and complex guidance for retail outflows. The PRA has also published some guidance. Whilst the LC ratio will not form part of Pillar 1 until 2015, the new regulations have significant and wide ranging implications for all UK-licenced deposit takers.

How do financial firms and system providers such as ALMIS International interpret, implement and deliver on these new regulations? Read full article