On 26.03.2015, the ECB published the final version of its regulation on the reporting of supervisory financial information (ECB/2015/13).
The aim of the regulation is to achieve uniform financial reporting, comparability of reported information within the EU, and to fill the existing data gaps. FINREP 2.0 will provide the ECB with transparency regarding the income and risk situation of EU banks.
The user group will be expanded considerably when compared with hitherto existing regulations. Previously, only groups applying IFRS were obliged to provide financial information, now, single entities applying HGB/German GAAP will also be subject to reporting requirements. The report will have to be submitted on the basis of HGB/German GAAP figures in accordance with the IFRS structure. Furthermore, parent companies, subsidiaries as well as the subsidiary companies, based in Germany, of credit institutions that are not supervised by the ECB (e.g. from Great Britain) will also have to provide financial information in the form of a single-entity report.
The criteria for determining the scope and the application date are divided as follows:
- Significance: significant, less significant
- Reporting levels
- Accounting standards: IFRS, national GAAP/HGB (German GAAP)
According to the definition in Article 6(4) of the EU Regulation no. 1024/2013 (SSM Regulation), institutions shall be considered significant if one of the following criteria is met:
- the total value of the institution's assets exceeds EUR 30 bn;
- the total value of the institution's assets exceeds EUR 5 bn and is greater than 20 % of the gross domestic product of the member state where the institution is based;
- the institution has requested or received financial assistance from the EFSF or the ESM;
- the regulator classifies the institution as being "significant".
With respect to reporting levels, a distinction is made between groups, single entities, parent companies or subsidiaries as well as a branches.
The following overview helps to determine the scope and first application date:
The possibility of getting an exemption from the reporting requirements on an individual basis for a parent institution or a subsidiary of a group is explained in Article 1(2) of the FINREP Regulation (ECB/2015/13) in conjunction with Article 7 of the CRR, analogous to solvency reporting (the so-called "waiver“ rule).
With respect to the scope and contents of the reports, a distinction is made between: Full FINREP (65 templates), SSFR –Simplified Supervisory FINREP (33 templates), OSSFR – Over-simplified Supervisory FINREP (19 templates) and Data Points (selected indicators from 11 templates).
For those enterprises applying HGB/German GAAP, the reporting obligations, which are significantly more extensive compared with previous national reporting requirements (e.g. balance sheet statistics, or 'BISTA', the Financial Information Regulation, or 'FinaV'), will create organisational, content-related, and procedural challenges.
The accounting-driven reporting requirements will foster stronger cross-functional cooperation between reporting and accounting. Moreover, as the FINREP tables, in terms of their presentation, are in principle based on IFRS accounting, there will be an increase in the reporting burden for enterprises applying HGB/German GAAP. Furthermore, the requirement to produce quarterly reports on the basis of HGB/German GAAP will result in additional process costs that should not be underestimated.
Another new challenge for institutions that draw up accounts in accordance with HGB/German GAAP is complying with the requirement to provide data on Non Performing Exposures (NPE) and Forbearance Exposures (FBE).
The requirement for financial instruments to be broken down by sectors, products and regions coupled with the necessity of reconciling this with other reports (e.g. BISTA, asset encumbrance) as well as with the balance sheet and P&L further reinforce the need for an appropriate data resource to be available and data granularity.
SKS offers implementation support in the form of planning and execution
SKS, with its content-related know-how and implementation expertise based on many years of consulting experience and expert knowledge in the areas of accounting, risk management, credit processes and regulatory law, is able to provide institutions with effective support for their business activities as well as for their implementation requirements.
In order to define overall targets for a project and to create concrete plans we recommend conducting a preliminary study/gap analysis to obtain greater transparency and clarity for decision-making.