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CEN Workshop Agreement

Status: Working Group Working Draft

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Contents 1 Foreword 2 Introduction 3 Scope 4 Normative references 5 Terms and definitions 6 Symbols and abbreviations 7 How to start with XBRL. Supervisory Perspective 8 How to implement and extend XBRL taxonomies 9 Architecture, Methodology and Best Practices 10 Management and maintainability 11 How to transmit, process, and validate instances 12 Bibliography

Foreword

This document is a working document. This document has been prepared by CEN/WS XBRL, the secretariat of which is held by NEN. This document is a working document.

Introduction

The set of recommendations included in this document aim to facilitate the implementation of European National Supervisors to adopt XBRL in any of the reporting frameworks. The following chapters will provide guidance on the use, understanding, preparation, and extension of their filings in eXtensible Business Reporting Language (XBRL).

This guidance is in the form of notes in association with the pertaining requirements clause and uses the terms “should” (recommendation), “may” (allowance) and “can” (possibility). Organizations wishing to implement this CWA would be expected to consider all recommendations where the term “should” is used.

Scope

The guidance and recommendations included in this document have been created for regulatory filings in the context of European supervisory reporting.

In this document, “regulatory filings” encompasses authoritative financial reporting standards and generally accepted accounting principles/practices (or GAAP), regulatory reports whose subject matter is primarily financial position and performance and related explanatory disclosures, and data sets used in the collection of financial statistics; it excludes transaction- or journal-level reporting, primarily narrative reports (for example, internal controls assessments) and non-financial quantitative reports (for example, air pollution measurements).

Normative references

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The following referenced documents are indispensable for the application of this document. For dated references, only the edition cited applies. For undated references, the latest edition of the referenced document (including any amendments) applies. EN xyz:199x, Title of the european standard. EN ab c:199x, General title of series of parts — Part c: Title of part.

Terms and definitions

Eurofiling 

Eurofiling project is an open joint initiative of the European Banking Authority (EBA) and the European Insurance and Occupational Pensions Authority (EIOPA) in in collaboration with XBRL Europe, as well as stakeholders as banks, solutions providers, academy and individuals. The deliverables are Data Models, XBRL taxonomies, know-how and materials for Supervisory Frameworks: COREP, FINREP and Solvency II.

ESFS European System of Financial Supervisors 

Before and during the financial crisis in 2007 and 2008, the European Parliament has called for a move towards more integrated European supervision in order to ensure a true level playing field for all actors at the level of the European Union and to reflect the increasing integration of financial markets in the Union. As a result, the supervisory framework was strengthened to reduce risk and severity of future financial crises. European System of Financial Supervisors that comprises three European Supervisory Authorities, one for the banking sector (EBA), one for the securities sector (ESMA) and one for the insurance and occupational pensions sector (EIOPA), as well as the European Systemic Risk Board.

EBA 

The European Banking Authority was established by Regulation (EC) No. 1093/2010 of the European Parliament and of the Council of 24 November 2010.

The EBA has officially come into being as of 1 January 2011 and has taken over all existing and ongoing tasks and responsibilities from the Committee of European Banking Supervisors (CEBS).

The EBA acts as a hub and spoke network of EU and national bodies safeguarding public values such as the stability of the financial system, the transparency of markets and financial products and the protection of depositors and investors.

The EBA has some quite broad competences, including preventing regulatory arbitrage, guaranteeing a level playing field, strengthening international supervisory coordination, promoting supervisory convergence and providing advice to the EU institutions in the areas of banking, payments and e-money regulation as well as on issues related to corporate governance, auditing and financial reporting.

COREP and FINREP 

To achieve a high level of harmonization and strong convergence in regular supervisory reporting requirements, EBA has been developing guidelines on supervisory reporting with the aim of setting up a supervisory reporting model with common data definitions. The Guidelines on Financial Reporting cover consolidated and sub-consolidated financial reporting for supervisory purposes based on IAS/IFRS as endorsed by the European Union.

The original Guidelines on FINREP were issued by the Committee of European Banking Supervisors in December 2005. Agreed changes in IFRS were incorporated into the latest FINREP published in December 2009.

Further major changes to the accounting standards which will impact FINREP are expected. The revised FINREP will be reviewed in due course to take account of the changes in accounting standards.

EIOPA 

The European Insurance and Occupational Pensions Authority (EIOPA) was established in consequence of the reforms to the structure of supervision of the financial sector in the European Union. The reform was initiated by the European Commission, following the recommendations of a Committee of Wise Men, chaired by Mr. de Larosière, and supported by the European Council and Parliament.

EIOPA’s main goals are:

• Better protecting consumers, rebuilding trust in the financial system.
• Ensuring a high, effective and consistent level of regulation and supervision taking account of the varying interests of all Member States and the different nature of financial institutions.
• Greater harmonisation and coherent application of rules for financial institutions & markets across the European Union.
• Strengthening oversight of cross-border groups.
• Promote coordinated European Union supervisory response.

EIOPA’s core responsibilities are to support the stability of the financial system, transparency of markets and financial products as well as the protection of policyholders, pension scheme members and beneficiaries. EIOPA is commissioned to monitor and identify trends, potential risks and vulnerabilities stemming from the micro-prudential level, across borders and across sectors.

EIOPA is an independent advisory body to the European Parliament, the Council of the European Union and the European Commission.

SOLVENCY-II 

The Solvency II Directive 2009/138/EC is an EU Directive that codifies and harmonises the EU insurance regulation. Primarily this concerns the amount of capital that EU insurance companies must hold to reduce the risk of insolvency.

Once the Omnibus II directive is approved by the European Parliament, Solvency II will be scheduled to come into effect. [1] [2]

Symbols and abbreviations

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How to start with XBRL. Supervisory Perspective

During this chapter it will be described how the XBRL standard is introduced for adoption from the regulator perspective. It will be presented the different options and levels of adoption that will set the supervisor strategy. Then the minimum set of steps to perform a proper introduction to the standard will follow. Next the current models to be adapted and the information systems to be integrated in the reporting process will be introduced. Finally it will be described additional considerations to prepare and plan in order to establish the proper circuits and services to enable the standard with the supervised entities.

Determine the level of XBRL adoption Since XBRL Standard adoption several years ago, different alternatives in how to use and interchange XBRL between regulators and supervised entities have been applied.
To determine the adoption strategy intended in the regulator is probably the first step because this will establish the roadmap between regulator and supervised entities in time to adapt and replace current reporting requirements with new compliance rules to be adopted.

Level 1 of adoption: The regulator will use the XBRL standard as the transmission electronic format with supervised entities. The approach is not intrusive with current IT systems. A set of tools can be provided by regulator to facilitate submission options using a regulatory portal and XBRL embedded word documents, excel workbooks or PDF templates.

Level 2 of adoption: The regulator will use the XBRL standard as the transmission electronic format with supervised entities and will develop supplementary software applications free of use that renders the reporting information from the supervised entities and deals with the proper generation of the XBRL instance documents to be submitted. The Regulator will also provide additional services to supervised entities to validate instances, visualize XBRL documents or tracking submission status. XBRL can be adopted by supervised entities at the “highest” reporting level (i.e. consolidated) solely for purposes of complying with regulatory requirements

Level 3 of adoption: The regulator will use the XBRL standard as the transmission electronic format with supervised entities. It will also develop software applications integrated with their internal process to adapt the information systems to interface the new XBRL models to enable the proper reception, maintenance and exploiting of the reporting XBRL information. The regulator in this level will also be able to provide to the supervised entities the same services as level 2 *validation, visualization, monitoring”. It is also envisaged to train IT department with XBRL skills to adapt, evolve and maintain this integration trough different version of the reporting information. Embedded Processes with XBRL will enable automation on currently manual assembly and review processes and processes enhancements that lead to more timely higher quality data for decisions making purposes.

Plan and prepare the new reporting models On the regulator perspective there are two main key drivers in the XBRL adoption, compliance with new directives and data accuracy with supervised entities to meet both reporting requirements.
It is also envisage to plan and prepare the adaptation of all data requirements. For this plan a proper knowledge by regulators on the new directive implementation using XBRL is required.

• Learn the basics, How XBRL works, which is the terminology.
• How the new data models have been driven from business model and semantic rules into XBRL syntactic schemas and fillers forms that define reporting data. Take into account the last architecture modeling issues that the new required information is providing.

It is specially recommended to understand the Eurofiling architecture approach as it is the current basis on normalization of data modeling across Europe. It will be introduced later in chapter 6, but it mainly consists on defining a method to model dictionary data, their aspects and relationships in terms of domains and hierarchies, the business validation rules and the corresponding classifications of the data in different tables and forms for filing and visualization.

The regulator will have to answer several questions t before taking decisions that will mark their path to the reporting processes, for example:

• • How many different reporting templates and periods do we need to receive from supervised entities?
  • Which is the frequency of this reporting information quarterly, half a year, yearly?
  • Which is the minimum supervised unit of information to receive?
  • Which is the maximum size recommended for each report to receive?
  • Which is the time of response of the processing information for the reports received?
  • Is it allowed to submit reporting information in several fragments or parts?
  • Is it allowed to re send reports or parts of reports for amendments after submission?

• How this data inherited from European frameworks fits into the national level model. Study if the current information models for supervised entities have more disclosures or information. In case more detailed information is required the knowledge on extension from European taxonomies is needed. This will be detailed on chapter 5.

Adapt and Review reception infrastructures From IT perspective the regulators would have the opportunity to review their current transmission infrastructures with supervised entities to incorporate the new reporting standard to their channels:
In case the regulator has well established mechanisms in place, the required activity is to adapt these circuits to interchange XBRL instance documents, including additional circuits of submission for header information and validation reports following recommendations given in document (CWA2) and they will be introduced later in chapter 8.

A set of items to review are: - Select, reuse or adapt the transmission channel (web secure portal upload, email secure smtp, web service secure integration submission, other) - Select, reuse or adapt the security signature and certificates to be used for supervised entitites. - Select the additional services on the submission protocol to implement (tracking or monitoring information submitted, visualization on reported instances, pre validation on regulatory requirement information, etc.) Adapt and Review internal Information systems For those regulators that are adopting XBRL into their internal information systems, it is required to adapt and review how to fit the received information according to XBRL semantics into their information systems in order to take advantage of the standard using OLAP models, formula validation across multiple reporting documents and exploiting the information using business intelligence tools. Currently there are few national supervisors that can set a common set of recommendations to follow to be part of this section, as each national internal system is outside the scope of harmonization topics of this document. The only clear assessment regarding internal adoption is that the European framework and the XBRL International abstract model version 2.0 provide a clear method to enable consistent definition of business information including rules and validation that facilitates the creation of XBRL data-warehouses to access and analyze supervised information through their different perspectives of regulatory reporting (compliance, risk, prudency, transparency).

Summary During this chapter the regulatory supervisor has been able to introduce all the topics required to establish a roadmap to adapt their systems and plan the reporting information adaptations to produce.

Figure 1 — reference diagram extracted from XBRL International Best Practices Board

Some Key Challenges to summarize for Adoption - Variety of Information Domains - Variety of Information collection methods - Gaming internal management support - Internal knowledge documentation - Explaining value for reporting entities - Data governance processes - Multiple approaches to XBRL implementations in other countries - Data modeling - Legacy reporting requirements - Obsolete and duplicated data - Changing legal requirements - Analysis of software requirements - Monitoring Implementation - Review data collected - Data processing performance - making use of new data - training, sharing and communicating the process with entities

How to implement and extend XBRL taxonomies

One of the key challenges that regulators are facing when adopting XBRL standard as introduced in previous chapter is to fit the reporting requirements given by European frameworks and directives into the existing supervisory and compliance processes. Most of the cases the flexibility of the XBRL standard allows the national supervisor to fulfil both requirements, while the mechanisms to implement and extend taxonomies vary from one to another. The objective of the present chapter is to provide a set of guidelines collected from previous XBRL directive implementations and national adoptions across Europe that have been harmonized in several recommendations. As a reminder the regulatory reporting must keep the data accuracy, transparency, compliance and interoperable as standard. European Framework background information The scope of this chapter will focus on European framework for regulatory reporting. Under this context, currently there are three major initiatives that will drive the application of the corresponding recommendations on terms of implementation and extension of taxonomies for regulatory supervisors: - Eurofiling initiative: represents the groups of experts on regulatory reporting from EBA, EIOPA and XBRL Europe that have been working in a common project to collect the regulatory reporting practice across Europe. - EBA Taxonomy frameworks: COREP and FINREP - EIOPA Taxonomy framework for Solvency II image1 Those three initiatives have been developing the XBRL implementations that are the basis of the European framework pillars for supervisory reporting (Basel II, Solvency II and Financial Statements).

National Supervisors in their adoption will use those taxonomies to their regulatory reporting according to the study on the national laws and application of the EU directives. In terms of XBRL implementation those National adoption will represent the third level of extension: image 2 Figure 2 — National Supervisor Regulatory Extension Levels

XBRL Standard extension Mechanism: [To include the XBRL standard mechanism to extension. Brief introduction and usage] - What is an extension [to complete definition]. Purpose of extending European regulatory framework taxonomies  the objective is to add more disclosure on base information (in some cases could be used also to restrict not applicable regulatory reporting information) - namespaces [include definition] owner of data defined and protected namespaces level 1 and level 2 - flexibility - XBRL is extensible --> adaptation to national discretions - Modularised architecture of XBRL - Structural changes in the data are not reflected in the instance - One common format is more cost-effective than a numerous number of different proprietary formats

- versioning

Guideline on Extensions: [To include the extension recommendations, list of best practice to follow] A taxonomy extending the European Framework should at least take into account a set of basic principles to facilitate efficient regulatory oversight, consistency of supervision and reduction of redundancies and duplications in their implementation: 1) Simplicity of the reporting process: the resulting regulatory taxonomy architecture must focus on simplification of instance document creation. 2) Stability: the application of the regulatory taxonomy architecture must minimize the impact of changes resulting from amendments of information requirements on consuming systems. 3) Consistency: the framework under the regulatory taxonomy architecture must be consistent in design and the taxonomies must be coherent and explicit. 4) Compliance with specifications, best practices and related taxonomies: the regulatory taxonomy architecture must conform as much as possible to approaches inherited from related projects (Level 1 and Level 2). 5) Maintainability: the regulatory taxonomy architecture must allow for the framework be easy to maintain by supervisors. 6) Performance: the application of the regulatory taxonomy architecture should result in other technical advantages including reduced size of instance documents, better performance in processing (e.g. DTS loading, validation),

- Reduction of redundancies and duplications - Standardization, simplification - Reduced information friction to facilitate (more) continuous monitoring and audit of controls - Consistency of Regulatory Supervision - Facilitate Efficient Regulatory Oversight - keep the coherence and consistency of the model

Architecture, Methodology and Best Practices

This chapter links to CWA1. Use also references to documents drafted before and if not enough clear for roll-out package as a new supervisor, rewrite or add sample information to them.
Some reference document to analyze are:

1. "An Architecture for European XBRL Taxonomies" where a description in the following topics is described:

   • Supporting concepts(Owner, Model supporting schema, Namespaces)
   • Public elements
   • Dictionary of concepts (Metrics, Dimensions, Families, Perspectives, Domains, Explicit domain members and hierarchies)
   • Reporting requirements layer (Frameworks, Taxonomies, Tables, Modules, Validation rules)
   • Architecture

2. "Data Point Modelling Methodology"
3. "Abstract description of the model represented in taxonomies following the DPM approach"
4. "Comparison of Conceptual, Logical and Physical models vs. the Data Point Modelling."

Management and maintainability

This chapter should include all topics related to how the supervisor is facing the taxonomy frameworks usage, repository location and management, mirror and caching procedures to check different and current version and also extension visibility to make the harmonization of taxonomies transparent to other countries (if possible, at least as a recommendation on best practices). This would cover localization (in terms of how to physically locate), availability and download. It should be worth noting the necessity to add a link or task to CWA2 in order to see the possiblity to study the use of taxonomy package descriptor (from corefiling) as sugested by coordinator group management

How to transmit, process, and validate instances

This chapter should include all topics related to how the supervisor is facing the taxonomy frameworks usage,

Bibliography

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