Gibraltar Financial Services Commission Capital Requirements Directive CRD IV Industry Workshop Author John Pashley Date October 2015 Version 1.0 Status For Information

Workshop Objectives To provide an update on EBA technical documentation, with respect to extending CRD IV Pillar 3 reporting. To identify key points that filer’s should consider in meeting their reporting obligations. To update filers on the technology that will be used by the FSC for the collection of CRD IV data through 2016. To identify topics of interest for subsequent workshops. Firms remain responsible for ensuring they have conclusive understanding of the legislation and their obligations to comply with EU reporting requirements.

EBA Documentation

(Some) Sources of Information Prior Legislative Text Prior Legislative Text Implementing Regulation (EU) No 2015/227 DIRECTIVE 2006/48/EC 2006/49/EC Implementing Regulation (EU) No 680/2014 DIRECTIVE 2002/87/EC Amending Implementing Regulation (EU) No 650/2014 [Disclosure] Supplementary Guidance DIRECTIVE 2013/36/EU Supplements, Amends or Repeals Based on Implementing Technical Standards Regulation (EU) No 648/2012 Vendors & Consultancies Regulation (EU) No 575/2013 Support Tooling Invoke Filing Portal DPM Including Access DB XBRL Taxonomy Supporting Documents DPM Architect <xml/> XML <xml/> XSD Taxonomy Architecture <xml/> XML <xml/> XSD Filing Rules Arelle EBA Guidance Etc. Specialist Software

Access to Information Legislative Documentation Websites EBA Daily Alerts European Commission RSS Websites European Banking Authority (EBA) European Commission EUR-Lex Official Journal of the European Union (OJEU), EU Law, etc. EuroFiling European Committee for Standardisation (CEN) Bank for International Settlements (BIS)

Many Elements to the ITS Main Package Final Draft ITS Annotated Templates Validation Data Point Model XBRL Taxonomy V2.4.0 Published September 2015 LCR DA, Multi-Currency etc. V2.3.1 Point Release May 2015 Additional Material EBA DPM Documentation XBRL Taxonomy Documentation Filing Rules (CEN-> EBA -> EIOPA) Convergent approach to data modelling and exchange

Data Validation

Background The GFSC has conducted an assessment of CRD IV regulatory reporting data that has been submitted by Gibraltar firms through Q4 2014 and Q1 2015. The EBA validation formula were run against each template set with details of validation failures recorded for further analysis. The following slides provide some aggregated statistics on the errors, as a reflection of data quality. Guidance is provided on the reasons that specific failures can occur, with reference to EBA documentation where appropriate. Firms are reminded of their obligation to ensure the quality of their regulatory reporting data. The EBA validation rules providing a minimum quality standard. It is possible to prevent Approval and Submission where validation failures exist. Competent Authorities are required to supply CRD IV data to the EBA if requested, and errors will compromise this commitment. From the EBA validation workbook: All validation rules are applicable and equally binding. Not meeting "blocking" validation rules when submitting data to EBA will cause the file to be rejected, therefore the submission is not accomplished. Validation rules with "non-blocking" severity status are equally binding and must be monitored by reporters (clear explanations should be provided to the relevant competent authority where needed).

Summary of Findings There were 271 failures across 50 different EBA rules. eba_v2037_s failed 32 times representing 12% of all errors for the period being monitored. eba_v0310_m was next most frequent, occurring 26 times or 10%. Approximately 1/3 (32%) of all errors were due to the value not having the required sign. C_S_07.00 - CR SA - Standardised Approach to capital requirements was involved in the highest number of failures.

EBA Documentation http://www.eba.europa.eu/regulation-and-policy/supervisory-reporting/implementing-technical-standard-on-supervisory-reporting-data-point-model- Filers should ensure they reference the latest published version of all material. The Implementing Technical Standards (ITS) includes an Excel workbook that specifies all of the EBA’s validation rules. The XBRL Taxonomy and Supporting Documents zip file contains a useful Roadmap showing when specific updates are scheduled for release and application.

EBA Validation Workbook The latest version appears as the first worksheet tab and refers to the Taxonomy version. Each validation rule has a line in the worksheet. The EBA provides some change control detail within the workbook including when a rule is deleted, deactivated and possibly reactivated after being corrected. Rules are categorised by type, with the majority (Manual) implementing data checks specified by EBA Business experts. Under the FSC’s contract with Invoke, the eFiling Portal is updated regularly in accordance with the latest EBA Taxonomy. Filers should be aware that the EBA continues to identify incorrect rules and to publish revisions.

EBA Validation Rule Specification The EBA regularly rebuilds the CRDIV XBRL Taxonomies to implement the rules as reflected in the DPM and published in the Excel workbook. Many rules implement a simple formula with row/column notation used to identify the template cells involved. Rules can be specified once that need to be applied to several sheets of a template. A rule can specify a range of columns or rows. Sign checks identify where values must be reported as either positive or negative. The EBA specifies some rules as Blocking which will cause them to reject a submission. The EBA classifies non-blocking rules as requiring explanation. For template C 02.00, check that a value is equal to the sum of 3 other values Row 590 Column 10 = Row 600 Column 10 + Row 610 Column 10 + Row 620 Column 10 Check that a value on template C 01.00 is equal to the product of two values on templates C 02.00 and C 03.00 Column range, formula applicable to all sheets Row range Value must be positive There is a reliance on software vendors, such as Invoke, to ensure that their XBRL processing correctly implements the validation rules as specified in the EBA Taxonomy package. Blocking and Non-blocking Rules The Invoke Portal uses font colour to identify Blocking (Red) from Non-blocking (Amber) rules.

Validating Data through the Invoke Portal Sample Rule v0310 (1/3) : Single Template Clicking on these arrows will show or hide row and column labels Formula validation can be triggered from the template list or from within the template form The validation details can be reviewed in Excel if required Clicking on a cell reference will highlight the value in the template Clicking on a line icon will expand or contract the detail

Validating Data through the Invoke Portal Sample Rule v0310 (2/3) : Single Template Rule v0310 was run 144 times against template C07.00 The 61st execution of the rule was the first that resulted in an error Validation v0310 states that for table C 07.00.a the value in column 10 of row 10 should be equal to the sum of the values in column 10 across rows 70, 80, 90, 110 and 130. This check is repeated for each column that exists between 30 and 50 and between 200 and 220. The rule applies to all sheets. XBRL terminology is used in the validation process This specific error relates to the International organisations sheet

Validating Data through the Invoke Portal Sample Rule v0310 (3/3) : Single Template iaf:numeric-equal($a, iaf:sum(($b, $c, $d, $e, $f))) The value in column 200 of row 10 does not equal the sum of the values in column 200 across rows 70, 80, 90, 110 and 130 Column 200 Row 010 $a = 1037034 Row 070 $b = blank/zero Row 080 $c = zero Row 090 $d = blank/zero Row 110 $e = blank/zero Row 130 $f = blank/zero The same error is reported for another 7 sheets

Validating Multiple Templates From the List View This method provides an easy way to check for validation errors Select each of the templates to be validated together If you have created multiple versions ensure that the correct grouping is selected Ensure that Formulae validation is checked The Formulae tab shows the results of the EBA checks and is where errors will be highlighted Note that the other validation categories are mostly concerned with structure and should always give a valid result

Validating Multiple Templates From the Form View This method will enable you to view the data along with the validation errors Select each of the templates to be validated together and click View The validation results are presented and any cells involved in failed rules are highlighted The selected templates are opened for view, from which Formula validation can be triggered Clicking on a template will show it in the main window

Rule v0218 involves templates C01.00, C02.00 and C03.00 Validating Data through the Invoke Portal Sample Rule v0218 (1/2) : Multiple Templates Rule v0218 involves templates C01.00, C02.00 and C03.00 Validation v0218 is a check that ‘Common Equity Tier 1 Capital’ is equal to the ‘Total Risk Exposure Amount’ multiplied by the ‘CET1 Capital Ratio’ as reported on C01, C02 and C03 respectively.

iaf:numeric-equal($a, iaf:numeric-multiply($b, $c)) Validating Data through the Invoke Portal Sample Rule v0218 (2/2) : Multiple Templates iaf:numeric-equal($a, iaf:numeric-multiply($b, $c)) $a = 69924702 $b = 234197503 The value on C01 does not equal the product of the values on C02 and C03 $c = 23.4567

Example Errors Percentage values are not entered in the correct format. Applicable to all percentage values in accordance with EBA Filing Rules. Negative values not entered with a sign. All values that are required in a sum formula have not been provided. Often where breakdown rows have not been completed. Values are not consistent across templates. Reporting requirements include many cases where values need to be repeated. Reported values do not comply with instructions in the template requirements of the Implementing Technical Standards (ITS). These take the form of Excel and Word Annex documents published by the EBA.

Example Errors Percentage values are not entered in the correct format Reference: Latest published version of the EBA XBRL Filing Rules from the ITS Supervisory Reporting pages. http://www.eba.europa.eu/regulation-and-policy/supervisory-reporting/implementing-technical-standard-on-supervisory-reporting-data-point-model- Example Rule eba_v0218_m C03.00 Row 010 Column 010 CET1 Capital Ratio should have been entered as 0.2986 It should be noted that all percentage values must comply with the EBA filing rules. A number of incorrect figures have been reported that do not result in a validation error but will compromise the use of the data for supervision. 69,937,047.00/234,197,503.00 = 0.2986

Example Errors Values not entered with the appropriate sign Reference: Relevant annex from the EBA technical standards applicable to the templates in error. http://www.eba.europa.eu/regulation-and-policy/supervisory-reporting/implementing-technical-standard-on-supervisory-reporting Any amount that increases the own funds or the capital requirements shall be reported as a positive figure. On the contrary, any amount that reduces the total own funds or the capital requirements shall be reported as a negative figure. Where there is a negative sign (-) preceding the label of an item no positive figure is expected to be reported for that item. Example Rule eba_v3685_s C01.00 Row 170 Column 010 Value entered should be negative

Example Errors Breakdown rows have not been completed (1) Reference: EBA Validation Rules. http://www.eba.europa.eu/documents/10180/1067579/EBA+Validation+Rules+-+2015+06+15.xlsx/e8071788-c89a-46d8-ae78-f0d3101ded32 Example Rule eba_v0310_m C07.00 Values in the Total row need to sum up to the values in the Breakdown rows Many templates have calculated values which Invoke implements as yellow cells but these do not provide absolute consistency

Example Errors Breakdown rows have not been completed (2) Reference: EBA Validation Rules. http://www.eba.europa.eu/documents/10180/1067579/EBA+Validation+Rules+-+2015+06+15.xlsx/e8071788-c89a-46d8-ae78-f0d3101ded32 Example Rule eba_v1532_m C60.00 Values in the Total rows need to sum up to the values in the Breakdown rows Note that the template is reported as valid but a non-blocking rule has failed

Example Errors Incorrect application of percentage ratios Reference: EBA Validation Rules. http://www.eba.europa.eu/documents/10180/1067579/EBA+Validation+Rules+-+2015+06+15.xlsx/e8071788-c89a-46d8-ae78-f0d3101ded32 Evaluation n°1 : v0219_m: [C 01.00] {C 03.00, r020,c010} = {C 01.00, r020,c010} - ({C 02.00, r010,c010} * 4.5%) Evaluation n°1 : v0221_m: [C 01.00] {C 03.00, r040,c010} = {C 01.00, r015,c010} - ({C 02.00, r010,c010} * 6%) Evaluation n°1 : v0223_m: [C 01.00] {C 03.00, r060,c010} = {C 01.00, r010,c010} - ({C 02.00, r010,c010} * 8%) Example Rule eba_v0219_m C01.00/C02.00/C03.00 CET1 capital surplus/deficit should equal CET1 Capital minus 4.5 percent of the Total Risk Exposure Amount

Amy Ballantine-Latin Supervisory Feedback

Liquidity Coverage Ratio Additional Liquidity Management Metrics Guidelines on sound remuneration policies Key Risk Indicators

Supervisory Review and Evaluation Process (SREP) GFSC SREP process is changing in line with new guidelines published by the EBA Business Model Analysis Assessment of internal governance and controls Assessment of capital and adequacy of capital Assessment of liquidity and adequacy of liquidity Business plans Internal assessment Corporate and risk culture Risk Management Internal control framework General considerations ICAAP Capital buffers ILAAP

Thank You Questions