Regulatory Reporting

The regulatory requirements for banks – especially over the last few years – have been constantly increasing and changing. While the rules in Basel III are being phased in, new rules are already being prepared under the name of Basel IV and will in part fundamentally alter the requirements just introduced. Some changes have been driven by regulatory authorities, who constantly introduce new rules in the search for a panacea against financial crises. Other changes are in store due to developments in related fields.

Impact of Accounting on Regulatory Reporting

The conversion to IFRS 9 also naturally means a change in the FINREP templates (the fact that the regulators did not allow even a slight adjustment of the national GAAP templates is a different issue altogether). Reciprocal effects often occur as a result of changes in accounting stemming from the desired strong connection between financial reporting and regulatory reporting (e.g. due to FINREP or disclosure, but not solely caused by these). It can be assumed, among other things, that the disclosure templates published by the European Banking Authority (EBA) will only be applied one single time in this form, namely on December 31, 2017. Later, conversion of the RWA balance sheet reconciliation to the new IFRS 9 positions will be required. Regulatory legislation is also having an increasing influence on accounting due to the strong connection between financial and regulatory reporting. The rules for calculation of expected loss, for example, will now be supplemented by corresponding guidelines issued by the Basel Committee or the EBA. Non-compliance will not have any direct consequences on the financial statements, but capital surcharges will be punished in the SREP (Supervisory Review and Evaluation Process). In other aspects, Basel has fallen behind accounting developments. The fundamental review of the trading book should involve a comparison of accounting and regulatory definitions in the trading book, among other things. The definition of "held for trading" will not be discontinued with IFRS 9, but the corresponding category on the asset side of the balance sheet will probably disappear. It is reasonable then to anticipate changes in the Basel drafts, which are actually already known.

Implementation of the Requirements for Regulatory Reporting

In the implementation of new or amended requirements for regulatory reporting, the following steps should generally be followed:

  • Technical analysis and interpretation of requirements
  • Technical decision on integration into or reciprocal effects on bank controlling
  • Identification of data sources and the creation of data sources
  • Definition of inter-area processes
  • Implementation, including tests

Support by FAS AG with Setup of Regulatory Reporting

FAS AG has many years of experience in the field of regulatory reporting and disclosure. It systematically uses its expertise in the area of finance here in order to leverage synergies between both areas, efficiently assign responsibilities, and reduce duplicate work. The focus is on reports in accordance with FINREP, COREP, and capital calculations and reconciliations as well as the disclosure obligations of Pillar 3 or Chapter 8 of the Capital Requirements Regulation (CRR). In the field of regulatory reporting, FAS AG provides advice on both the technical design and interpretation of the corresponding national and European requirements and for the implementation of report processes and the design of a technical set of rules on the basis of the existing data structures.

 Andreas Huthmann Managing Partner