XBRL AND BANKING SUPERVISION José María Roldán Director General of Regulation, Banco de España Chair, XBRL España Chair, Committee of European Banking Supervisors (CEBS) 1 ère Conférence XBRL France 17 janvier 2006

Directorate General of Regulation, Banco de España 2 Playing several roles today  As Director General of Regulation of the Bank of Spain  As Chair of the Committee of European Banking Supervisors (CEBS)  As Chair of XBRL-Spain

Directorate General of Regulation, Banco de España 3 The importance of XBRL  Efficient markets depend on information –A market is efficient if prices reflect all information on underlying asset(s)  But information is costly –To generate, transmit and use  XBRL promotes efficiency of information flows –For both the generators and users of financial information –This, in turn, promotes greater efficiency and efffectiveness for the system as a whole –Including through pricing that is based on more accurate and timely information and therefore that better reflects underlying realities  Public policy aspect of XBRL –Accuracy –Reliability –Speed

Directorate General of Regulation, Banco de España 4 CEBS What is CEBS?  A high-level committee of representatives from the banking supervisory authorities and central banks of the European Union What are its tasks?  To advise the European Commission on banking policy issues, in particular for the preparation of draft measures for the implementation of EU legislation  To foster consistent day to day implementation and application of Community legislation by issuing guidelines, recommendations and standards  To promote supervisory co-operation and provide for the exchange of supervisory information

Directorate General of Regulation, Banco de España 5 CEBS and initiatives on reporting  Current situation: 25 countries asking for different information - different definitions; different IT systems; incompatible formats  CEBS has taken two main initiatives to promote common reporting requirements: 1. Common reporting of the solvency ratio (COREP): final publication 13 January Common reporting for financial data (FINREP): final publication 16 December 2005  These initiatives take advantage of the fact that Basel II and IFRS will require all supervisors to change their reporting requirements  And XBRL provides the right technology at the exact moment it is needed most!  CEBS has decided in both initiatives to promote the use of XBRL with the development of two taxonomies.

Directorate General of Regulation, Banco de España 6 Why? Expected benefits: Level playing field: common reporting framework across the EU Reducing administrative costs for banking groups (mainly for cross-border banks) Removal of potential obstacles to financial market integration Easier exchanges of information between supervisors Increased cost effectiveness of supervisory activities in the EU More flexible framework: across countries and over time Improving the quality of information flows from reporting entities

Directorate General of Regulation, Banco de España 7 Advantages of implementing XBRL in EU (I)  XBRL will enable banks to fulfil the reporting requirements of supervisory authorities across the EU with a single IT standard  The costs of implementing EU common reporting in cross-border groups will be reduced  Less administrative and implementation costs  Small banks may benefit from a free standard like XBRL and from the economies of scale derived from the development of the XBRL taxonomy by CEBS  Less implementation costs  Also, supervisors may benefit from economies of scale  Increased cost effectiveness of supervisory activities due the use of IT STANDARDS

Directorate General of Regulation, Banco de España 8 Advantages of implementing XBRL in EU (II)  XBRL standard will facilitate the transmission of the common definitions expressed in common EU reporting  Level playing field and removal of obstacles for financial market integration  In short, the compatibility of formats, contents and IT systems supported by XBRL will allow supervisors to collect information on a decentralized way, while having all the functionalities as if a centralized data base were in place and benefiting from additional flexibility

Directorate General of Regulation, Banco de España 9 European Law: Basel II implementation Basel II Directives 2000/12 & 93/6 Country 1 Auth. 1 Report 2Report Country 3Country 2Country 25 Auth. 2Auth. 3Auth. 25 Report Report National Regulation Transposition into national Legislation European Law 9X,XX% Basel II compatible National Implementation XBRL challenge!

Directorate General of Regulation, Banco de España 10 XBRL Window of opportunity Too early Too late Operational: Basel II IFRS/IAS Establishing: CEBS XBRL EU Today!

Directorate General of Regulation, Banco de España 11 XBRL in Spain  Spain’s involvement  Spain became an XBRL jurisdiction in 2004  XBRL España Association is chaired by Banco de España (Central Bank and Banking Supervisory Authority of Spain). Public interest aspect of XBRL  Aim of XBRL España –To foster the introduction, adoption and development, both at a national and international level, of the XBRL language, for the purpose of unifying the standards applicable to financial and business reporting  Ultimate goal: –Facilitate the integration of the Spanish & European Financial Markets

Directorate General of Regulation, Banco de España 12 Activities of XBRL-Spain  Quick increase in the number of members in XBRL Spain, up to 40  Cooperation between different regulatory agencies is one of the main targets  A number of XBRL taxonomies has been completed  XBRL has been implemented and now is in use  There has been a strong collaboration with other international taxonomies (i.e., COREP, IFRS-GP)

Directorate General of Regulation, Banco de España 13 Projects of Bank of Spain SIIF: receiving public financial statements in XBRL –So far, only the main groups are included in this project –During 2006, the rest of the banking groups will join the project –Banks may re-use the information to report to other agencies (i.e. Securities Commission)

Directorate General of Regulation, Banco de España 14 Projects of Bank of Spain Spain COREP: receiving capital information based on new CRD (EU’s Basel II). –Leading the XBRL project since the beginning. –Developing a national project during 2006, in order to start receiving information in 2007 –Cross-border Spanish banks may report the same information to other supervisory agencies in EU

Directorate General of Regulation, Banco de España 15 Projects of Bank of Spain Spain FINREP: receiving supervisory reporting in XBRL –Implementing a harmonised financial reporting framework in EU –Participating in the development of the FINREP taxonomy –To be developed during 2007

Directorate General of Regulation, Banco de España 16 Other XBRL projects in Spain  General Identification Data: –Setting a common taxonomy to identify the reporting entity  General Accounting Plan: –To allow the reporting of non-financial companies according to local GAAP  Listed companies information: –Developed by the Spanish securities commission

Directorate General of Regulation, Banco de España 17 CONCLUSIONS  One of the strengths of XBRL is that it only needs a small critical mass  From the Spanish perspective, even just the Banco de España initiatives for banks’ reporting represent a huge step forward  But if we take all of the different initiatives together, e.g. –In Spain –In the EU (CEBS) –And more further afield (e.g. SEC initiatives)  We have a hugely potent tool Template reporting is dead… …Welcome to the era of tag reporting!

Directorate General of Regulation, Banco de España 18 Thank you for your attention