Paris, June 22nd to 25th, 2009 Giancarlo Pellizzari Head of Prudential Policy Dexia Group Implementing XBRL for a cross-border banking group in Europe

Paris, June 22nd to 25th, 2009

Giancarlo PellizzariHead of Prudential PolicyDexia Group

Implementing XBRL for a cross-border banking group in Europe

22

What does XBRL mean for Dexia?

Agenda


Agenda

Experiences

COmon REPorting

FINancial REPorting

IFRS Taxonomy

Conclusion

Introduction

33


Agenda


Introduction

Experiences

COmon REPorting

FINancial REPorting

IFRS Taxonomy

Conclusion

Introduction

44


A group of approx. 250 entities, more than 28.000 staff members,

present in 37 countries (21 EU member countries)

What is Dexia ?

Introduction

55

In terms of Reporting:

Public Reporting– Solo Financial Statements in local GAAP (or IFRS when allowed) and Conso Financial Statements in IFRS or local GAAP

(Dexia Group using IFRS at consolidated level)– Pillar III (Basel II public reporting)

Regulatory Reporting– COREP– FINREP– Pillar II– MIFID– ECB Statistics– SEC filings– Other local GAAP reporting (Schema A, BAFI, etc.)

Other Reporting– Tax– Legal/social

Our Environment


Introduction

66

Our Environment

Introduction


BE

LUFR

SAPHolding

DBB

DCL

DBL

STATUTORY

VISUALSCOPE

MIS CONSOESSBASE

CHECK CHECK

MAGNITUDECOMMON PARAM

SPEC. LOCAL PARAM

CONSOLIDATED

CONSODHLD

CONSODBB

CONSODCL

CONSODBL

INTERNAL REPORTING

EXTERNAL REPORTING

77


Complexity?

Basel II IFRS Solvency II

Pillar I Pillar III IFRS 7 F/S Pillar III Pillar I + notes

Group Group Group Group BE (+group) BE

BE FR LU BE FR LU BE FR LU BE FR LU

Introduction

88


Complexity? (Example)

Introduction

Maximum Credit Risk Exposure is referred to in Solvency II, Basel II and IFRS regulations.

Of course, as the regulations are different, a slight shift in the definition is present and leads to distortions of the presentation of the same concept in the different reports.

As highlighted on the next slide, the same information is requested in three different reporting. A complete reporting under XBRL could help providing an harmonized concept and avoid double or even triple entries for one information.

Furthermore, no precise and harmonized definition does exist, some reporting companies are considering full exposure, other “non-depreciated” exposure etc..

Above the problem of definition, another challenge is to comply with all the different interpretations for each country. Cross-border reporting turns out to be a real nightmare.

Find a definition internally that may fit all regulations.

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Agenda



Experiences

COmon REPorting

FINancial REPorting

IFRS Taxonomy

Conclusion

Introduction

1010


A good preparer must therefore compare regularly its financial statements with the ones of its peers (information to be obtained from Financial Communication department or analysts surveys), to be sure that its options are in line with the others

Why is XBRL interesting for a preparer?

Therefore : benchmarking !

What does XBRL mean for Dexia ?

Organizing the presentation of financial statements True and fair view (Framework §46)

Respect of accounting standards use for preparation

…

and neutrality (Framework §36)

1111


Reviewing the financial statements Base of presentation

Options selected in accounting standards

Valuation principles

Compare them with peers (Framework § 39)

Etc…

A good analyst must therefore compare regularly the Financial Statements, mainly the disclosures, presentation and valuation policies, to be sure that the financial statements are comparable

Why is XBRL interesting for an analyst?

Therefore : benchmarking !


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Dexia is active in XBRL since 2003...

The Past

We saw the regulators’ attraction to XBRL because it was the right IT language to fit their needs in IFRS and Basel II reporting

XBRL was seen as a powerful tool for reducing administrative burden internally (Use XBRL as a tool for more harmonization, flexibility and gain of time both vertically and horizontally)

Importance of exchange of data in a cross border banking group (Internally and externally)

Importance of having one language with all regulators

WHY?


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Use of XBRL in various regulatory reporting in European countries:

COREP

FINREP

MIFID

Pillar II

The Present


Dexia is still active in XBRL:Participation (as much as possible) in regulators’ discussions on XBRLParticipation in XBRL International conferencesThierry Nederlandt, Head of Accounting and Consolidation (Dexia Group),

member of the XBRL Advisory Council (XAC) of the IASC Foundation

Chosen for a flexible XBRL approach/tool (instead of a regulatory approach/tool) allowing easy internal and external developing capabilities

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Dexia is already adapting it’s IT infrastructure in order to benefit, internally, from the advantages of an harmonized system.

Fast closeComparability (Internal & External) Mutualization of knowledgeInternal managerial informationetc…

The Present


Staying up to date on the current evolutions permits the group to stay aware of the future requirements that will be applicable in the next steps of implementation of XBRL and to already prepare the staff and the processes in order to enter easily in action for each update;

Dexia also answers to draft papers and taxonomies from IASCF and other regulators to support the financial industry’s specificities and our vision.

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Banks to create their own extensions or their own taxonomies? Referring to the US where 12 different taxonomies are already in use; considering the

specificities of the industry.

Or having particular extensions and dimensions to keep one single reporting line but also respecting industries specificities

The Future


XBRL to be used by more and more financial reporting stakeholders:Stock exchanges

Rating agencies

Other…

XBRL to become not only an external language of communication but also internal

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Agenda


Experiences

Experiences

COmon REPorting

FINancial REPorting

IFRS Taxonomy

Conclusion

Introduction

1717


Agenda


COmon REPorting

Experiences

COmon REPorting

FINancial REPorting

IFRS Taxonomy

Conclusion

Introduction

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MIFID and Pillar IIReported in XBRL only in BelgiumTo be adopted by other EU countries ?


COREP (COmmon REPorting – Pillar I reporting under Basel II framework), could become a real nightmare…

Starting from a single and unique European data model, regulators modified it to fit their own local needs

Some banks (locally active mostly) were also arguing for modifying the European model

Regulators also changed the definitions of concepts

Resulting for crossborder banks in a nightmare, where the same reporting element may be computed and reported in many different ways (12 COREP for Dexia)

“Pure Regulatory” Reporting

But CEBS has now committed “to deliver EU-wide reporting formats in 2012 for all credit

institutions and investment firms located in the European Union”

Each regulator has changed the EU base taxonomy (red box) to fit with its needs, leading to several taxonomies and

huge costs for EU global banks

But will be adjusted to a REAL COmon REPorting in 2012 (?)

Experiences : COREP

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We need to be careful any proposed regulatory intervention itself does not lead to further regulatory failure. Two potential avenues for such regulatory failure are described below:

Regulatory failure: risk with future evolution

If the proposal sets harmonised requirements for information that is so high that compliance costs for firms are greater than benefits for the market as a whole; or

Source: CEBS: Expert Group on financial Information, IA COREP May 5th, 2009


Experiences : COREP

If the proposal requires a too low ceiling (key data are not collected, leading to net costs) regulators will be no longer able to identify some risks effectively, leading to an ineffective supervisory framework and, as a potential consequence, to a higher risk of financial instability.

2020

COREP XBRL workflow

Experiences: COREP

Fermat

CR worksheets

CR worksheets

CR worksheets

CA-MR-OR worksheets

CA-MR-OR worksheets

SharepointCentralised Decentralise

d

(If not under XBRL)

XBRL tool Local Soft

Assembling Assembling

XBRL

XLS XLS

Local format

Other regulator


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Agenda


FINancial REPorting

Experiences

COmon REPorting

FINancial REPorting

IFRS Taxonomy

Conclusion

Introduction

2222

direct filling

Dexia

taxonomy

Pillar III

taxonomy


Dexia’s different reportings

FINREP

taxonomy

IFRS

taxonomy

Public Financial

Statements

Regulatory reporting

(FINREP & Pillar III) Internal reporting

Other legal reporting (tax, statistical etc.)

Others

Tax

Experiences

SEC Proposes Roadmap Toward Global Accounting Standards to Help Investors Compare Financial Information More Easily

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Link between the FINREP and our Financial Statements

FINancial REPorting

Experiences: FINREP

FINREP (FINancial REPorting) regulatory reporting based on IFRS and having its own taxonomy

Same issue for FINREP than for COREP (but limited to specific parts)

FINREP taxonomy is based on the IASCF taxonomy

The link between both taxonomies to be stronger and stronger

As per the examples that will follow, a large part of the required information is, if not similar, very close.

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As such, we build up a comprehensive file with all the information required by all the regulators

No more need to input twice the same information

The information is always available for every reporting entity

These principles should be applied at all levels of consolidation

“ The same information should be inserted only once “

FINREP: Basic principle


Experiences: FINREP

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Counterparties



Experiences: FINREP

Mapping of the reportings and related ECB comments

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e.g. “public sector”

"Non-commercial administrative bodies responsible to central governments, regional governments or local authorities, or authorities that in the view of the competent authorities exercise the same responsibilities as regional and local authorities, or non-commercial undertakings owned by central governments that have explicit guarantee arrangements, and may include self administered bodies governed by law that are under public supervision". Art 4 (18) of the CRD.



Experiences: FINREP

Common definitions

Used for different reporting in different states like COREP and FINREP in Luxembourg and Belgium

Like the Equity instruments Including statistical impairment in FINREP but not in COREP, currently too much discrepancies and different definitions. Need for harmonization.

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Links with FINREP (and F/S)


Example

Experiences: FINREP

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Links with F/S (and FINREP), partly provided by RMG

Experiences: FINREP


Example

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Experiences: FINREP


Example B/S

CB B/S

CEBS B/S

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CSSF B/S


Experiences: FINREP

Example B/S

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CBFA B/S


Experiences: FINREP

Example B/S

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link from F/S to FINREP

Experiences: FINREP


Example B/S

3333

DEXIA’S B/S : link with magnitude accounts


Experiences: FINREP

Example B/S

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Example 2: additional detail


Experiences: FINREP

Example B/S

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Comments on the discussion paper

Experiences: FINREP

Discussion paper “Financial Statements Presentation”Not very suitable for the banking industry, like most of the IFRS, very oriented towards industrial companies.

Should be more oriented towards a multi-tier service instead of only investor oriented.

Very positive to impose a rigid classification as it improves comparability but this classification should reflect the realities of the different industries.

We do not support presenting cash flows for the banking industry as it won’t add any value.

We do believe that the use of a global standard like XBRL could reflect the specificities of our industry and furthermore increase comparability between and inside the different industries.

We believe that the use of extensions and dimensions in XBRL will provide both the structure and the flexibility asked by the stakeholders.

Benchmarking !

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FINREP Challenges


Experiences: FINREP

Link with IFRS and banks’ financial statements

National discretions:– CEBS guidelines not always clear– CEBS guidelines not always respected by member states– Changes in the “business format” may have insidious impact on the taxonomy (deleting a line changes the definition of the total – unless “among which”)– Additional information inconsistent with the CEBS format– Sometimes, regulators may give interpretations to IFRS rules

Dimensions:– Preferred instead of tuples (link with IASCF?)– More standardization may be a benefit (exhaustive list of flows used throughout FINREP)– Definitions of some dimensions (counterparties => links with COREP, ECB, etc.)

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The Future: Using Dimensions ?

Experiences: FINREP

As per our chart of accounts, clearly related

3838


Agenda


IFRS Taxonomy

Experiences

COmon REPorting

FINancial REPorting

IFRS Taxonomy

Conclusion

Introduction

3939

Main Structure of the IFRS taxonomy

The Taxonomy is following rule by rule the IFRS requirements Ease to find an item and the related disclosures

No problem to find out relative examples or description rules

Clear follow up of the updates of the regulation. No difficulties to highlights impacts of IFRS changes


IFRS Taxonomy

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IT viewpoint of the XBRL taxonomy


IFRS Taxonomy

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IFRS Taxonomy


Table Presentation of the taxonomy

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The use of the concept of “dimension” could help structure the information provided facilitating even more the understanding and the use of the provided information.

Summary of the main comments relating to IFRS taxonomy

IFRS taxonomy

The issue of versioning has been raised by number of respondents

Proposition to add formal descriptions of the concepts in order to avoid misunderstandings or divergent interpretations.

Propositions to add extensions relating only to some industries or to propose different taxonomies for the different industries. Proposition to extend examples to all the possible situations, could be through dimensions, to allow other examples than the ones proposed by the IFRS wording. (Not all the reporting companies

have biological assets…)

Need to follow more the detail level required by the standards and the common practice.

Need to translate the choices left to the reporting entities in the taxonomy (example: either in the notes or in the PFS)

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Agenda


Conclusion

Experiences

COmon REPorting

FINancial REPorting

IFRS Taxonomy

Conclusion

Introduction

4444


How does it work ?

XBRL tool

MAPPING

xls VALIDATION

XBRL conversion

Accounting

Risk

Tax

Others

Data sources

IFRS Taxonomy

4545

Feedback

Experiences : COREP


On the softwares (XBRL focused) :

Flexible enough to be adapted to all taxonomies To be adapted on a international banking IT structure Mapping is still the key Additional taxonomies can be quickly added

On the taxonomies :

Advantages of XBRL aren’t used Basis taxonomies are modified by local regulators A unique EU taxonomy is necessary XBRL is not mature enough to be internally used

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Detail of problems faced by a transnational bank implementing XBRL

Different systems

People are reluctant to change

Information retention instead of global info sharing (protectionism attitude due, partly, to the crisis)


Risk of additional national requirements => no additional requirements should be accepted, the member states should be ready to accept “as is” taxonomy as it is perfectly in line with IFRS requirements (and those should be accepted anywhere)

Launch of the XBRL reporting

Conclusion

Risk of national protectionism from the different branches

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Experiences: FINREP

4848


Taxonomies need to be managed in an harmonized way i.e.Development of extensions has to be consistent with the “parent taxonomy”

Need for Best Practices

It’s just started but already running…

XBRL standards are now strong enough to be industrialized

More and more authorities are adopting XBRL, it is becoming the standard

XBRL offers a great opportunity to complete the work done by the IASB and the IFRIC on IFRS principles, as now XBRL may help to better compare information coming from different companies Furthermore, the use of XBRL does not require huge investments as most of the software are open-source

But

Conclusion

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THANKS FOR YOUR ATTENTION

Contacts

Giancarlo PellizzariHead of Prudential Policy

+32 22 13 50 49

[email protected]

Questions ?


Paris, June 22nd to 25th, 2009

Giancarlo PellizzariHead of Prudential PolicyDexia Group


Documents

Paris, June 22nd to 25th, 2009 Giancarlo Pellizzari Head of Prudential Policy Dexia Group Implementing XBRL for a cross-border banking group in Europe