13 January 2006
The Committee of European Banking Supervisors (CEBS) today published guidelines on a common reporting framework (COREP) to be used by credit institutions and investment firms when they report their solvency ratio to supervisory authorities under the Capital Requirements Directive (CRD)*.
The implementation of the CRD provides CEBS with a unique opportunity to promote harmonisation and efficiency, since existing reporting requirements for credit institutions and investment firms will need to be revised in all EU member states. The common solvency reporting framework, together with the recently published financial reporting framework (FINREP)**, represents an important step towards convergence in supervisory practices within the EU. The framework provides sufficient flexibility to meet the reporting needs of different supervisory authorities, while adopting a standard terminology and methodology.
The solvency reporting framework should reduce the compliance burden on cross-border financial groups while also improving the exchange of information between supervisory authorities. Groups operating on a cross-border basis within the Single Market will benefit from more consistent supervisory reporting formats based on the common framework, and will be able to satisfy these reporting requirements using a single database and common vocabulary. The new framework should also contribute to promoting a smoother transition to the new regulatory framework set out in the CRD.
Financial groups will no longer be required to prepare and submit their supervisory reports using up to 25 different national formats and variables and a variety of reporting technologies. Most EU supervisors will adopt around 80 percent of the core data in the common framework.
The common solvency reporting framework has been developed after extensive dialogue with market participants, including a formal public consultation in the spring of 2005. In response to the concerns raised by industry in that consultation, CEBS reduced the volume of required data by 70 percent from the original proposal.
In order to give the industry sufficient time to update and fine-tune their reporting systems, CEBS has agreed that national authorities may allow a certain degree of flexibility in their roll-out plans for the new framework, especially with regard to the IT challenges facing the industry.
National supervisors are free to decide on the technical aspects involved in implementation. CEBS considers, however, that XBRL*** can be a helpful tool in constructing a harmonised European reporting system. CEBS is developing an XBRL taxonomy, which will be made available without cost to national authorities and supervised credit institutions.
CEBS will monitor the implementation of the framework closely and will report on how it affects the convergence of supervisory practices in Europe.