19th%20XBRL%20International%20Conference%20

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19th XBRL International ConferenceReducing
regulatory burden with XBRL a catalyst for
better reportingJune 22-25, 2009Paris, France

• 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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Our Journey . . .

• First Three Steps
• The Basel II Path
• Fast Track XBRL
• Future Roadmap

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First Three Steps
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The First Step (2001-04)

• About 20 departments of Reserve Bank of India
  receive data at about 20 locations from about 200
  commercial 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
  streamline multiple modes of data submission
  resulted in the origin of Online Return Filing
  System (ORFS)

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Step Two (2004-07)

• 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 Big Leap (2007-09)

• 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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The Basel II Path
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Indian Regulatory Architecture

• India has been adopting international best
  practices in the area of banking 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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Basel-I Implementation

• India adopted Basel I in a phased manner from
  1992 onwards
• India stipulated the capital to risk weighted
  asset ratio of 9.0 as against international
  norms of 8 and a Tier I capital ratio of 6.
• Capital charge for market risk in line with
  market risk amendment of 1996 to the Basel I
  accord was adopted in 2005.

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Basel I Implementation

• India adopted Basel I in a phased manner from
  1992 onwards
• India stipulated the capital to risk weighted
  asset ratio of 9.0 as against international
  norms of 8 and a Tier I capital ratio of 6.
• Capital charge for market risk in line with
  market risk amendment of 1996 to the Basel I
  accord was adopted in 2005.

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Basel II Implementation

• Implementation of Basel II in India has been in
  a phased and 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 /
  standardised approaches of Basel II.
• RBI has also been preparing simultaneously for
  introducing advanced approaches for those banks
  which have sophisticated risk management structure

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Basel II
Pillar 1 Minimum Capital Requirement
Pillar 2 Supervisory Review
Pillar 3 Market Discipline
Capital for Credit Risk (SA FIRB AIRB)
Capital for Market Risk (SMA SDA IMA)
Capital for Operational Risk (BIA SA AMA)
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Capital

• 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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Capital

• The recent London Summit by G 20 has articulated
  certain action points on capital regulation
• G20 Leaders should support the progressive
  adoption of the Basel II capital framework, which
  will continue to be improved on an ongoing basis,
  across the G20.

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Capital

• In this context, the BCBS should develop
  standards to promote the build-up of capital
  buffers in good times that can be drawn down in
  periods of stress. The BCBS should also
  complement risk-based capital measures with
  simpler indicators to monitor the build-up of
  leverage.
• The international standard for the minimum level
  of capital should remain unchanged until the
  financial system has recovered.

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Good Information Flow

• 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 risk
  sensitive framework for capital regulation it is
  essential that the information flow is designed
  to be timely and accurate

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Challenges in Basel II Implementation- Basic/
Standardised approaches Reporting issues

• 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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Challenges in Basel II Implementation- Basic/
Standardised approaches Reporting issues
(contd..)

• 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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Challenges in Basel II Implementation- Basic/
Standardised approaches Reporting issues

• 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
  accurate and reliable extraction of data led RBI
  to introduce XBRL reporting system for Basel II
  reports from banks

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Challenges in Basel II Implementation- Advanced
Approaches Reporting issues

• 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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Challenges in Basel II Implementation- Advanced
Approaches Reporting issues

• 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
  the banks 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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Fast Track XBRL
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Approach

• High Level Steering Committee
• Involvement of banks
• 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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Basel IIReporting

• 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
• A 2- stage approach
• An 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 of both
  these applications

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System Overview and Dataflow
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RCA 2 Taxonomy Overview

• 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 based
  information capture

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Template Based Data Capture
Modules Templates
Capital requirements 2
Credit risk exposure 9
Market risk exposure 4
Operational risk exposure 1
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Elements
Total 425
Primary Elements 128
Dimensions 29
Domain Members 253
Hypercube 15
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Taxonomy Structure
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Advantages to RBI

• 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 periodic reports
• 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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Future Roadmap
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Implementation Strategy

• Phased Approach
• In Phase I, Basel II reporting implemented
• International Seminar coinciding with launch
• Sec 42 Return under ORFS being brought to XBRL
  standards
• Taxonomies for Annual Accounts being developed

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Taxonomy Development

• Institute of Chartered Accountants of India
  (ICAI) has been working towards
• Formation of XBRL-India jurisdiction
• Development of Taxonomies
• Taxonomies for CI already developed yet to be
  implemented
• Banking taxonomies getting developed
• RBI and ICAI are working closely

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ICAI Taxonomy Structure

• 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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Approach

• Designing general banking taxonomy in accordance
  with the CI 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 Vs. IFRS 2008
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 and industry 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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Data model Issues

• 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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Key areas for dimensions (Notes)

• Repo transactions
• Composition of Non-SLR investments
• Exchange traded Interest Rate derivatives
• Risk exposure on Derivatives
• Maturity pattern of certain items of assets and
  liabilities
• Risk category wise country exposure
• Loan Assets subject to restructuring
• Segment reporting
• Related party disclosures

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Asset Liability Management
Maturity Deposits Advances Investments Borrowings Foreign 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 I M E N S I O N
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Target

• Based on IFRS 2006
• Banking specific tags have been defined
  additionally in the core schema
• Separate extended links for the bank reporting
  appended to existing taxonomy
• Basic structure of financial statements and their
  details, both included in the same extended link
  (unlike CI)
• No dimensions have been defined, instead extended
  links have been used
• Implement the system for March 2010 reporting

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• Your
• Comments
• and
• Suggestions
• Please
• . . .
• asramasastri_at_rbi.org.in
• prravimohan_at_rbi.org.in