19th XBRL International Conference - Presentation by RBI

8/3/2019 19th XBRL International Conference - Presentation by RBI

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Banking Supervision Track

XBRL-based Basel II Reporting System:Experience of Reserve Bank of India

A S Ramasastri & P R Ravimohan

June 24, 2009


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` First Three Steps

` The Basel II Path

` Fast Track XBRL

` Future Roadmap


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` About 20 departments of Reserve Bank of Indiareceive data at about 20 locations from about 200commercial banks with about 70000 branches

` Templates for reporting, called returns, which are

around 250 as on date` Varying degrees of technology levels across banks

` Attempts to rationalize the returns and to streamlinemultiple modes of data submission resulted in the

origin of Online Return Filing System (ORFS)


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` An important fortnightly return called Form A has

been brought under ORFS

` It has been designed and developed using XML

tags to be in readiness for adopting XBRL` Based on the experience, the system has been

extended to another 50 returns

` To standardize the data elements across returns

and to be in line with international practices,XBRL was considered


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` The Governor formed a High Level Steering

Committee with the Deputy Governor as

Chairperson to implement XBRL-based data

reporting by banks` After a pilot study and feasibility analysis, the

Committee mandated implementation of the

newly introduced Basel II reporting system

under XBRL` Basel II implementation is a simultaneous

journey, going parallel


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` India has been adopting international best

practices in the area ofbanking regulation in a

well calibrated manner which is suitable to

requirements of the financial system` Reserve Bank of India has emphasized on

strengthening of regulation on capital adequacy

as a key parameter in promoting financial stability


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` India adopted Basel I in a phased manner from 1992onwards

` India stipulated the capital to risk weighted asset ratio of9.0 % as against international norms of 8% and a Tier Icapital ratio of 6%.

` Capital charge for market risk in line with market riskamendment of 1996 to the Basel I accord was adoptedin 2005.


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` India adopted Basel I in a phased manner from 1992onwards

` India stipulated the capital to risk weighted asset ratio of9.0 % as against international norms of 8% and a Tier Icapital ratio of 6%.

` Capital charge for market risk in line with market riskamendment of 1996 to the Basel I accord was adoptedin 2005.


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` Implementation of Basel II in India has been in a phasedand calibrated manner

` All commercial banks in India have migrated to Basel II

as on March 31, 2009

` To begin with, India has adopted the basic / standardisedapproaches of Basel II.

` RBI has also been preparing simultaneously forintroducing advanced approaches for those banks whichhave sophisticated risk management structure


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Pillar 1Pillar 1

Minimum CapitalMinimum CapitalRequirementRequirement

Capital for CreditCapital for CreditRiskRisk

((SASA; FIRB; AIRB); FIRB; AIRB)

BaselBasel IIII

Capital forCapital forMarket RiskMarket Risk

(SMA;(SMA; SDASDA; IMA); IMA)

Pillar 2Pillar 2

Supervisory ReviewSupervisory ReviewPillar 3Pillar 3

Market DisciplineMarket Discipline

Capital forCapital forOperational RiskOperational Risk((BIABIA; SA; AMA); SA; AMA)


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` The current global financial turmoil has brought to

sharp focus the role of capital regulations in

promoting financial stability and mitigating

procyclicality` Capital should serve as an effective buffer to absorb

losses over the cycle, so as to protect both the

solvency of financial institutions in the event of

losses, and their ability to lend.


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` The recent London Summit by G 20 has

articulated certain action points on capital

regulation

` G20 Leaders should support the progressiveadoption of the Basel II capital framework, which

will continue to be improved on an ongoing basis,

across the G20.


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` In this context, the BCBS should develop standardsto promote the build-up of capital buffers in goodtimes that can be drawn down in periods of stress.The BCBS should also complement risk-basedcapital measures with simpler indicators to monitorthe build-up of leverage.

` The international standard for the minimum level of

capital should remain unchanged until the financialsystem has recovered.


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` Underestimation of risk and the consequential

underpricing of risk are attributed as major factors

for the present crisis.

` Since Basel II attempts to build a more risksensitive framework for capital regulation it is

essential that the information flow is designed to

be timely and accurate


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` The implementation of Basel II has thrown up several challenges

due to its requirement of timely receipt of information from banks in

a standardised and transparent format and at the disaggregated

level.

` One of the challenges is upgradation of bank-wide information

system through better branch connectivity within banks and then

integrating this with the regulatory reporting

` Under Pillar II of Basel II, RBI has to ensure that banks assess

accurately all the risks they are exposed to and accurately

determine the capital they need to have in commensurate with their

risk profile


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` Under Pillar III (Market Discipline) of Basel II suitable

disclosures have to be made by the banks so as to

enable the market participants to take informed

decisions

` RBI has been monitoring banks exposure to certain

sensitive sectors with a view to ensuring prescription of

appropriate risk weight

` RBI has been in a calibrated manner revising risk

weights and provisioning relating to sensitive sectors

with the objective of ensuring asset growth with

minimum volatility.


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` Basel II implementation thus requires quicker,

quantitative and qualitative analysis of financial

information by the regulator so that banks can be

monitored closely vis-a-vis Basel II guidelines and

certain corrective policy measures be taken

` These requirements of efficient, standardised and

transparent reporting system which facilitates accurateand reliable extraction of data led RBI to introduce XBRL

reporting system for Basel II reports from banks


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` The Basel II framework also offers multiple options of increasing

sophistication for computing capital requirements for the three

major categories of risks.

` While for the present, banks are required to adopt the relatively

simpler approaches available under the framework, RBI may

permit few banks to migrate to advanced approaches

` A draft time frame for the purpose has been drawn up

` Implementation of advanced approaches would require

tremendous data processing at the bank level and RBI


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` The requirement of maintaining long time series data,processing it and modelling several variables would

throw up several issues of reporting within the banks

`

The requirement of assessing the data quality of thebanks and validating the models of the banks will be

dependent on real time and seamless information flow

between banks and RBI.

` The XBRL project would be critical in this regard.


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` High Level Steering Committee

` Involvement ofbanks

` Interaction with international institutions Europe,

Japan, Australia` Learning from best practices in other central

banks Bank of Spain

` Working closely with external consultants

` Moving the other stakeholders in India


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As directed by the High Level Steering Committee, the Capital

Adequacy Return (RCA 2), based on the Basel II norms has been

taken up first

A2- stage approachAn Excel Based Report preparation Tool

A web portal for

Submission of Returns by the Banks

Viewing Bank Returns and MIS Reports by RBI

A Dimensional XBRL Taxonomy sits on top ofboth these applications


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` Taxonomy tailored to Basel II Reporting Requirements

` XBRL 2.1 and Dimensional Specification Compliant

` Taxonomy Architecture along COREP lines

` Multi dimensional in nature and template basedinformation capture


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Modules Templates

Capital requirements 2

Credit risk exposure 9

Market risk exposure 4

Operational risk exposure 1


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Total 425

Primary Elements 128

Dimensions 29

Domain Members 253

Hypercube 15


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` At RBIs end, following facilities/advantages :

generating standard and ad-hoc reports as required

maximum possible automation of processes

more analysis facilitated since less of data related issues expected

ease of incorporating data for various analytical studies and periodicreports

Quicker access to bank analysts and inspection officials

Provision for automated signalling of red flags in submitted data

which would need further analysis

Access of the centralized data repository by other departments like

banking policy department, monetary policy department, financial

markets department etc. as required

Use of business intelligence tool for advanced analytics and drill-

down/roll up facility


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` Phased Approach

` In Phase I, Basel II reporting implemented

` International Seminar coinciding with launch

` Sec 42 Return under ORFS being brought toXBRL standards

` Taxonomies forAnnual Accounts being developed


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` Institute of Chartered Accountants of India (ICAI)

has been working towards Formation of XBRL-India jurisdiction

Development of Taxonomies` Taxonomies for C&I already developed yet to be

implemented

` Banking taxonomies getting developed

` RBI and ICAI are working closely


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` Industry-based classification Commercial and Industrial companies

Banking companies

Non-Banking Financial companies

` Core Schema Exhaustive list of all element declarations

Common elements defined once

` Distinct extended links for each industry


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` Designing general banking taxonomy in

accordance with the C&I taxonomy Based on IFRS 2006

No dimensions

` RBI can use the banking taxonomy and extend it

to include dimensional structure FINREP structure


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IFRS 2006 IFRS 2008

Release date 15th August 2006 24th June 2008

Modularity The files (Schema and

linkbases) are located in one

folder.

The files are organized based

on the IAS and IFRS. There is a

core schema containing all the

elements defined, and linkages

to the different folders for every

IAS and IFRS.

Structure There was a common entry

point, wherein the users had to

select and browse the

taxonomy.

The entry point is entity specific

and hence has to be created by

the user of the taxonomy.

Elements i) 4100 (approx) i) 2700 (approx)

ii) Elements outside the IAS and

IFRS (common practices andindustry specific) are included in

the taxonomy

ii) Elements only from the IAS

and IFRS are part of taxonomy

Dimension Vs. Tuples Tuples are used in the

taxonomy

Dimensions have been included

in the taxonomy


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Notes to accounts information is largely tabular and

therefore is

` Multi-dimensional data

` Data points having similar attributes

IFRS 2006 Does not use dimension

IFRS 2008 Includes dimensions


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1. Repo transactions2. Composition of Non-SLR investments3. Exchange traded Interest Rate derivatives4. Risk exposure on Derivatives5. Maturity pattern of certain items of assets and

liabilities6. Risk category wise country exposure7. Loan Assets subject to restructuring

8. Segment reporting9. Related party disclosures


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Maturity Deposits Advances Investments BorrowingsForeign Currency

assets

Foreign Currency

liabilities

1 to 14 days

15 to 28 days

29 days to 3 months

Over 3 months & up to 6 months

Over 6 months & up to 1 year

Over 1 year & up to 3 years

Over 3 years & up to 5 years

Over 5 years

Total

PRIMARY

ELEMENTS

D

IM

E

N

S

I

ON


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Based on IFRS 2006

Banking specific tags have been defined additionally in the

core schema

Separate extended links for the bank reporting appended toexisting taxonomy

Basic structure of financial statements and their details, both

included in the same extended link (unlike C&I)

No dimensions have been defined, instead extended links

have been used

Implement the system for March 2010 reporting


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Your

Commentsand

Suggestions

Please

. . .

[email protected]

prravimohan@rb

i.org.in

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19th XBRL International Conference - Presentation by RBI