The Importance of Unified Reporting of Banking Supervision Information

To raise new questions, new possibilities, to regard old problems from a new angle requires creative imagination and marks real advances in science. - Albert Einstein

To facilitate consolidation of administrative authority over banking policy planning and financial supervision in Taiwan, the Executive Yuan established the Financial Supervisory Commission on July 1, 2005. Since the Commission was founded, it has led Taiwan’s regulatory authorities in a concerted effort to promote banking reform, urging a proper sequence of operations on the capital markets and pushing to internationalize Taiwan’s financial development. Under a centralized financial oversight mechanism, the regulatory agency must be able to obtain timely and useful information in order to manage effectively. As a consequence, improving the reporting of banking oversight information is truly an issue that demands urgent attention.

Judging from the information reporting measures adopted by foreign banking oversight bodies, if we want to increase oversight efficiency and effectiveness with the objective of reducing threats to the general public, the flow of financial information must be consolidated, making financial supervision in Taiwan more modern, internationalized and forward-thinking. Towards that end, creating a single reporting window, establishing an information-sharing platform and adopting advanced data standards are three essential prerequisites. At this point, as an example, I will briefly introduce for the reader’s reference the US Federal Financial Institution Examination Council (FFIEC).

One US banking oversight body, the Federal Deposit Insurance Corporation (FDIC), has over 8,000 financial institutions under its jurisdiction. These financial institutions must regularly report financial and business data to different supervisory bodies. Inevitably, much time and effort is consumed on duplicative tasks. In 2002, the FDIC proposed modernizing the reporting of financial oversight information, with plans to establish a single reporting window and an information-sharing platform. The concept was immediately echoed by other federal oversight bodies and private sector financial institutions, so high-level officials booted the idea up to the highest financial oversight agency in the US, the FFIEC, and now it is slated to come online during 2005.

It is predicted that, once the plan is realized, it will greatly curtail the amount of time needed to generate financial oversight information (including information gathering, verification, analysis and release), and will save large amounts of wasted resources while simultaneously improving the quality of oversight information. Key to the FFIEC’s ability to succeed in establishing a solitary reporting and distribution process will be its adoption of a data standard that is structurally complete and operable across system platforms, namely, the Extendable Business Reporting Language, or XBRL.

XBRL, a kind of XML (for extensible markup language), is a mainstream data exchange technology currently in use in the business-reporting sphere. The biggest difference between its data format and that of traditional EDI (e.g., text only, comma-separated values) is its structurally complete data standards, and the fact that its output data is highly universal and reusable. Besides being picked up by the FFIEC, XBRL, which has only been around a few years, has found practical applications in advanced countries around the world in all sorts of business reporting areas (internal and external corporate financial statements, tax return filing, bank examination, finance and credit, industrial and commercial registration, etc.). Moreover, tool software and solutions needed for XBRL are constantly being designed and developed.

In addition to its ability to do basic data verification, the XBRL data standard is able to represent rigorously and in structured fashion the logic of business reporting (including accounting classification, calculation checking, Chinese-English cross-listing, etc.). As a result, XBRL is able to integrate and manage complex business reporting. This makes it quite well-suited to a financial oversight institution with huge amounts of highly variable data.

Also, with support for different information platforms and programming languages, electronic data generated by XBRL can completely preserve the data’s underlying implications. Therefore, once XBRL data has been generated, it can easily be used again or exchanged. This is the main reason why FFIEC selected the XBRL data standard, the expectation being that it will successfully shorten data handling time, raise data quality and yield large-scale resource savings.

With a single reporting window and information-sharing mechanism apparently the way of the future, Taiwan’s Bureau of Monetary Affairs has already taken the initiative to construct an interagency (G2G) information-sharing platform for financial oversight agencies. The objective was to lay a good foundation for taking financial oversight in Taiwan towards informational modernization and internationalization, and the data standard used was none other that XBRL. Given this good foundation, if the Financial Supervisory Commission seeks to raise the efficiency and quality of information collection, and also lower resource wastage due to duplicated reporting by financial institutions, then it needs to quickly expand the current G2G to become a B2G single window for electronic data reporting; and at the same time, consolidate all of the data required by financial oversight agencies. This will make it easy for financial institutions to complete their reporting of all such required financial information in one go. They will not need to worry about problems with different data definitions or duplicate data entry. Financial oversight agencies can also make good use of XBRL, employing the standard with the most cost-effective method for managing information reporting, and for submitting, sharing and issuing the obtained reporting data, then generating required oversight reports.

In the future, the competent banking oversight authorities must deal with larger-scale, more rapidly changing financial information needs (stemming from, for example, Basel II and Taiwan’s Statement of Financial Accounting Standards no. 34), while not putting an unnecessary burden on private financial institutions. To succeed, this writer believes it is necessary to hasten the creation of a single window for financial oversight reporting, and at the same adopt more contemporary, forward-looking methods for transforming information flows. This will give the bank regulation profession solid backing as we hasten to catch up with advanced countries in the reform and development of banking supervision.