Annex to sectoral briefing to banks on supervisory reporting, October 2014

Transcription

1 Annex to sectoral briefing to banks on supervisory reporting, October EXPERIENCES WITH FIRST REPORTS UNDER CRD IV AND CRR During the first half of 2014, we had our first experiences with the new and extended COREP capital and risk reports and the new LCR and NSFR liquidity reports. Submitting the new reports has placed heavy demands on the banks, and preparations were numerous and intense. The vast majority of banks proved capable of submitting the new reports on time, even though the EBA and the European Commission had changed reporting requirements at a late stage and DNB's reporting systems where not always working as they should. We are working hard to enhance the reporting procedure so as to make it smoother and faster. Together with the Dutch Banking Association (NVB) and the banks, we participate in the Reporting Committee (Commissie Rapportages) to discuss developments in reporting and reporting requirements on a quarterly basis. We welcome your questions and suggestions for improving the reporting procedure and reports. Please them to toezichtrapportagesbanken@dnb.nl, stating improvements to the CRD IV reporting procedure' in the subject line. The NVB has offered that banks may also contact one of its officers, Hubert Schokker, to submit questions, report problems or put forward suggestions about reporting, stating 'Reporting Committee'. Below, you will find our experiences with respect to three key issues, suggested solutions and our expectations. The initial application of validation rules creates problems. The new prudential consolidation requirements have proved to be difficult. The deadlines for the application procedure for consideration of interim results are tight. We would also ask you to check the contact details included in your reports. We have also made this Annex to the sectoral briefing available on our Open Book on Supervision web pages. This makes it easier to use the various links that point to the website. The initial application of validation rules creates problems Before submitting the CRD IV supervisory reports, a bank must validate them using a prescribed set of validation rules, which ensure that the figures satisfy minimum quality standards. Until a report meets those validation rules, it does not fulfil the requirements and is considered not to have been submitted. 1

2 DNB, the EBA and the SSM have been lenient about this over the past reporting periods, but with the launch of the SSM on 4 November DNB will no longer be possible. All reports will then need to meet the validation rules. Only then will DNB and the SSM be able to compare reports. The reports of the seven Dutch significant banks for the first and second quarters of 2014 have been submitted to the SMM and the EBA, following data checks and resubmissions. We are making preparations for also submitting the reported figures of the other banks to the SSM in As you may be aware, we validate all reports and perform additional checks on them. When we received the first reports in late June, we found that most banks were still unable to validate them adequately in advance. At the time of the second submission in mid-august, the less complex banks did better, whereas matters still proved to be challenging for the more complex banks. As a result, we had to make a large number of resubmission requests. Another aspect that complicated matters, for the banks and DNB alike, was the fact that our feedback about validation errors did not yet meet the relevant standards. All in all, the past months have been eventful, both for the banks and for DNB. It is of crucial importance that all banks take account of the applicable validation rules and keep a close watch on developments in this area. Compliance with validation rules before submitting a report to DNB is a reporting requirement. We expect banks to submit only reports that fully meet all currently applicable validation rules, starting with reports with reference date 30 September This will be the first report under the new FINREP reporting procedure, and the validation process may still prove challenging. We will therefore observe some leniency with regard to this new report for September Section 1.4 of this Annex provides more information about application of the validation rules and how the EBA and DNB will keep you informed about them. Should you encounter difficulties that lead you to expect that you will be unable to meet the reporting requirements, we would ask that you inform your examining officer at DNB in advance. The new prudential consolidation requirements have proved to be difficult As supervision reports now include more data and the reporting requirements have been tightened, DNB, the SSM and the EBA will be able to use them in various new ways. For instance, reporting requirements covering the application of prudential consolidation have been made more stringent, and exemptions must be applied for again. Likewise, the scope of the Group Solvency template, which is part of the COREP report, has been expanded, allowing DNB to use the reports in its supervision within banking groups. The SSM also requires that it be given insight into intra-group relationships, solo information from banks within the group and the various levels of consolidation. 2

3 In January 2014, we sent a letter to all banks requesting that they report the levels of consolidation that apply to them (solo, sub-consolidated and consolidated). The subject was also addressed in the Banking Supervision Newsletter and the CRD IV sector briefing to banks, as well as on our Open Book on Supervision web pages. We saw that various banks found it difficult to apply the stricter requirements when submitting reports for the first two periods. Likewise, several banks experienced problems with respect to reports for which exemptions had previously been granted. We expect all banks to be able to report adequately at all required reporting levels starting with reports for the first quarter of Following submission of the first half-year reports, which included the new Group Solvency template for the first time, applying the prudential consolidation circle was given additional attention. Initial findings reveal that several banks need to review the template for completeness and supplement the information they provided. For instance, all subsidiaries in a banking group must be reported on separate lines. On various occasions, only directly held subsidiaries were reported, while indirectly held (second and third-tier) subsidiaries were incorrectly omitted. We would ask that you pay particular attention to the Group Solvency template. The deadlines for applying for permission to consider interim profits are tight Banks may add interim profits not yet approved in a meeting of shareholders to their CET1 capital if they meet the requirements set in the CRD. With the entry into force of the CRD IV, permission must be asked before submitting the COREP report. More details about the application procedure are provided on our Open Book on Supervision web page: The application procedure for significant banks may change following the launch of the SSM. We will inform you accordingly as soon as more details are known. Please note that losses must always be immediately charged to CET1 capital. The deadline of four weeks after the balance sheet date has proved to be challenging for banks and their auditors, which is why we have extended the submission deadlines for the next two reporting periods (September and December 2014) by one week at the request of the banks. Banks applying for permission should be aware that we will inform them of our decision only shortly before the submission deadline. We also wish to point out that adding interim profits must be in line with a bank's consistent accounting practices. Some banks have indicated that they will apply for permission to add interim profits verified by their external auditor to CET1 capital in each subsequent quarter. 3

4 Request to state correct and full contact details In the past months, we have been in frequent contact with banks about their reports and we give feedback to the reporting banks using the contact details stated in the contact details tab in the reports. We have noticed that this tab was not always completed in full or that the stated contacts appeared to be unavailable. We would therefore ask you to pay attention to the contact details that must be filled in on the contact tab for each reporting set. Reporting standards and submitting reports in e-line Various new and modified reporting sets were made available in e-line DNB on 3 October This means you can use them to submit the new FINREP reports and modified COREP reports for September We expect to make validation reports for reporting on the third quarter available to reporting banks by the end of October. They address all validation rules, including those for the new FINREP reports. This means that you will be sent the validation reports later, even if you submit your reports before the end of October. All new and modified reports will come with new and modified XML specifications, which we published on the e-line DNB information page on 6 October We expect banks to adjust their systems accordingly in good time. 1.1 New FINREP reporting sets The new FINREP reports were introduced on 1 July The first report will have reference date 30 September 2014, both for banks reporting under IFRS and for those reporting under Dutch GAAP. The reports must be submitted to us no later than 11 November You will note that the names of the forms in the new FINREP reports are displayed in accordance with the EBA's DataPoint Model (DPM) and that some forms are displayed in multiple sub-forms. This is because the forms in e-line DNB have been brought into line with the DPM Banks reporting under IFRS The new form sets have been available in the e-line DNB production and simulation environment since 3 October The FINREP reporting set comprises templates for the different submission frequencies, which means there are three separate form sets: FINREP Banks IFRS Consolidated and Branches, Quarterly (FINREP Banken IFRS Geconsolideerd en Branches - Kwartaal) FINREP Banks IFRS Consolidated, Half-yearly (FINREP Banken IFRS Geconsolideerd - Halfjaar) 4

5 FINREP Banks IFRS Consolidated, Yearly (FINREP Banken IFRS Geconsolideerd - Jaar) Parallel run: submission deadline extended As we indicated in the CRD IV alert that was issued in late 2013, banks reporting under IFRS will be asked to submit a CRD III FINREP parallel run report for September The extended submission deadline has been set at 25 November Accordingly, the existing and full FINREP Banks IFRS reporting set (CRD III version) will be shown in e-line DNB as an obligation for September All banks are asked to submit all templates, except Tables 15, 16, 19 and 34. It goes without saying that you will not need to address any check rules that do not work because you have not completed these tables, such as the check between Tables 1.2 and 16. Performing and non-performing loans and forborne exposures The FINREP reporting sets made available also include templates 18 Information on Performing and non-performing exposures (NPE)' and 19 Information forborne exposures (FBE)'. You will need to submit these templates for September 2014, as well as a number of templates (Tables 6, 9.1, 20.4, 20.5, 20.7 and 30.2) that were changed due to the creation of templates 18 and 19. For the first reporting exercise, we have extended the deadline for submission of these templates and the changes to 31 December You can either submit these data on 31 December 2014, by way of resubmitting the report for September 2014 in e-line DNB, or submit them together with the initial report for September 2014, no later than 11 November We recommend that you include them in the initial report to the extent possible to prevent error messages from being generated on 11 November Banks choosing to submit these templates on 31 December 2014 will need to resubmit the full FINREP report for the third quarter of 2014 no later than 31 December We also refer you to the EBA's website: We will inform you once the Implementing Technical Standard (ITS) on Supervisory Reporting (forbearance and non-performing exposures) has been published in the EU's Official Journal Banks reporting under Dutch GAAP The new form sets have been available in the e-line DNB production and simulation environment since 3 October For the September 2014 reports, banks 5

6 reporting under Dutch GAAP will need to submit the Phase 1 templates. See also our Open Book on Supervision page: (in Dutch only) The FINREP reporting set comprises templates for the different submission frequencies, which means there are three separate form sets: FINREP Banks Dutch GAAP Consolidated and Branches, Quarterly (FINREP Banken Gaap Geconsolideerd en Branches - Kwartaal) FINREP Banks Dutch GAAP Consolidated, Half-yearly (FINREP Banken Gaap Geconsolideerd - Halfjaar) FINREP Banks Dutch GAAP Consolidated, Yearly (FINREP Banken Gaap Geconsolideerd - Jaar) Phase 2 starts on 1 January 2015 (first report for March 2015). Templates 18 Information on Performing and non-performing exposures (NPE)' and 19 Information forborne exposures (FBE)' will be made available in Phase 2. Banks reporting under Dutch GAAP will not be obliged to submit a parallel run report for September Changes made to existing reporting sets As we announced earlier on our Open Book on Supervision pages ( - in Dutch only), the changes resulting from the Implementing Technical Standard (ITS) on reporting as adopted by the European Commission, dated 16 April 2014, will be introduced for the reports on the third quarter of These changes were made available on e-line DNB on 3 October 2014, and reporting sets were brought into line with EBA's Datapoint model2.1. We also refer you to the EBA's website: reporting/implementing-technical-standard-on-supervisory-reporting-data-point- model- Regrettably, the alignment with the EBA DPM referred to above has resulted not only in the required format changes (e.g. displaying sub-forms), but also in erroneous changes to the content of the LCR and Stable Funding form sets that we had not communicated before. However, these sets can no longer be changed now. This means that EBA's DMP specifications prevail. Banks using XML for submitting reports must adhere to the EBA's DPM import specifications. Import_specs_Corep_September_2014_(07_10_2014).zip 6

7 In addition, names of forms are displayed in accordance with the DPM and some forms are displayed in multiple sub-forms. The changes relate to the following form sets for all levels of consolidation (solo, sub-consolidated and consolidated/standalone): COREP Leverage ratio LCR Stable Funding We have provided further details of the changes on the e-line DNB information page: We would appreciate your reporting any problems caused by these changes to the content of the LCR and Stable Funding form sets, to us at stating Changes made to existing reporting sets in the subject line. 1.3 Asset Encumbrance You will need to submit reports on Asset Encumbrance for December We will provide further details about the forms as they become available in e-line DNB. Also, we will inform the banks once the Implementing Technical Standard (ITS) on Supervisory Reporting (Asset Encumbrance) has been published in the EU's Official Journal. implementing-technical-standard-on-supervisory-reporting-asset-encumbrance- 1.4 Validation rules and reports: designing the process The reports that you submit must meet all EBA validation rules. If they fail to do so by the submission deadline, which is 11 November 2014 for the third quarter, they will be considered late. Consequently, DNB expects banks that have not already done so to design a process aimed at verifying compliance with those rules. This process must be accurate and efficient. Unlike before, no validation checks will be built into e-line DNB. Banks that are unable to meet these requirements must contact us in advance. Please also see the CRD IV alert we issued in late DNB's validation rules will be in line with those published by the EBA. DPM 2.1 will be applied until the December 2014 reports, for which DPM 2.2 first applies. The EBA has also specified which validation rules must be deactivated, which we will deactivate accordingly. 7

8 This week, we will list on the e-line DNB information page the validation rules that have also been deactivated due to incorrect validations.. More information on DPM and the applicable validation rules can be found on the EBA's website: The EBA also issues validation rules that exceed the scope of a form set, for instance because they link two sets together. Although such rules will not be visible in DNB's standard validation report, banks will be expected to perform them before submitting their reports. The EBA announced in July 2014 that validations would no longer be part of the ITS. The validation rules are only published by the EBA itself. See the EBA website for the relevant announcement: We are currently working on improving the readability of the validation report that we send you. We will be making rounding issues in validation rules more visible by adding margins, which is one of the most important and most frequently requested adjustments. This will make for better distinction between those rules (messages) and validation rules reporting data quality issues. 2. Consultation documents 2.1 Specific provisions under CRD IV and CRR regarding the transition of liquidity requirements DNB issued a consultation document on the further implementation of the LCR and the discontinuation of liquidity templates 8028 and The consultation period has been set at four weeks. See our Open Book on Supervision page: ECB FINREP regulation The ECB will shortly launch a public consultation round on extensions to and the scope of FINREP reporting supplementing the European Commission's ITS. The consultation will cover all SSM countries. Given the national reporting framework, DNB will be issuing further guidance. In conclusion We are confident that this document will enable you to prepare and submit highquality reports over the next few months. If you have any questions, please feel 8

9 free to contact us at stating improvements to the CRD IV reporting procedure' in the subject line. 9