XBRL – The Financial Services Authority (FSA) UK Context

The FSA’s perspective on the use of XBRL (eXtensible Business Reporting Language)

for data exchange with the industry in the UK and other financial regulators

Presented by : Ayan Kar

XBRL Cross Sector Seminar (Members only session)

Madrid, Spain, 1st Jun 2012

1Copyright © The FSA, UK, 2012

FSA Unrestricted

Agenda

1. The FSA’s scope of regulation

2. Data exchange methods

3. The historical background of XBRL in the FSA

3. Regulatory reform in the UK

4. Potential benefits

3

FSA Unrestricted

1. About the FSA

• Key characteristics:– Independent body that receives all its funding through a levy on the financial services industry

– Accountable to H.M. Treasury and, through them, Parliament

• Statutory objectives: – Market confidence

– Financial stability

– Consumer protection

– Reduction of financial crime

• Scope includes:– Any firm or individual that carries out a regulated financial service market activity in the UK must be

authorised by us, unless they are exempt.

– This includes over 27000 entities spanning across major financial organisations, small firms and independent financial advisors

• The regulatory reporting data:– Collected using proprietary XML standards and there over 80 data items collected by the FSA as specified

in out handbook

– Defined for the firms depending on its size and permissions granted to it

“The Financial Services Authority (FSA) is a non-governmental body with statutory powers given to it by the Financial Services and Markets Act 2000.” (Source www.fsa.gov.uk)

4

FSA Unrestricted

1.1. Our scope – who do we regulate?

We regulate more than 27000 entities within the UK that span different business types and are subject to different aspects of regulation. One of our key challenges lie in managing diversity of regulatory policies & the population.

Breakdown by Entities allowed to hold Client Assets (CASS)

Breakdown by Entities allowed to hold Client Assets (CASS)

Firms in scope for MIFID ϕ Markets Conduct Regulation

Firms in scope for MIFID ϕ Markets Conduct Regulation

Circa 10% of Firms are subject to Prudential Standards for Banking,

Investment Firms & Building Societies ϕϕ

Circa 10% of Firms are subject to Prudential Standards for Banking,

Investment Firms & Building Societies ϕϕ

ϕϕ Firms most impacted by EBA and EIOPA directivesϕ Firms mostly impacted by ESMA directives

Breakdown by business typesBreakdown by business types Breakdown by Legal StatusBreakdown by Legal Status

5Copyright © The FSA, UK, 2012

FSA Unrestricted

UK Regulatory Architecture (Internal Twin Peaks

Apr 2012)

FSA (Financial Services Authority)

Prudential Business Unit

(PBU)

Conduct Business Unit

(CBU)

2. Data exchange methodsThe existing data exchange arrangements are based on the Integrated Reporting Standards that were adopted in 2006, these are based on proprietary XML standards developed by the FSA.

Not SpecifiedOpen-ended investment company

(OEIC)

Insurance Firms

Deposit Takers

Investment Managers

Services (UK) of an Overseas Firm

Advising, Arranging & Dealing as agent

Others

Th

e F

SA

Re

gu

late

d E

nti

tie

s (

De

fin

ed

by

FS

MA

20

00

)

XML

So

lve

ncy

I (

cir

ca

. 6

50

firm

s)

CR

D

& C

RR

(c

irc

a.

28

00 f

irm

s)

XML

UK Regulatory Bodies

H.M. Treasury

Bank of England

HMRC

European Insurance & Occupational

Pensions Authority (EIOPA)

European Banking Authority

(EBA)

European Securities &

Markets Authority(ESMA)

XML / Ad Hoc

XML

XML

XML

TRUP

TRUP

MIF

ID (

cir

ca

46

00 f

irm

s)

6Copyright © The FSA, UK, 2012

Pru

de

nti

al

& B

usi

ne

ss

Co

nd

uc

t (

Fin

anc

ial S

erv

ice

s &

Mar

ke

ts A

ct

20

00

)

XML

FSA Unrestricted

3. Historical background of XBRL in the FSA

We decide what data to collect and how to collect it based on the following criteria, these activities span multiple years:

• Amendment of the Handbook rules through a Legal process, Cost Benefit analysis and Public consultation • Policy driven initiatives like, Integrated Regulatory Reporting, Liquidity, Solvency II and Capital Requirements

Directive by the EU

May

20

02 Sep

20

03 Mar

20

04

May

20

05 Nov

20

06 Apr

20

10 Apr

20

11Ju

l 20

11

June

20

12 Mar

20

13

2002 2003 2004 2005 2006 2007 2008 2009 2011 2012 20132010

(All updates sourced from www.fsa.gov.uk)

7

FSA Unrestricted

4. Regulatory reform in UK

Financial markets have changed in the ten years since our inception. The Government has decided that in today’s market it is appropriate for the prudential supervision of banks and insurance companies to be carried out separately from work to protect consumers and regulate markets. The Government has therefore decided that the FSA will be divided and its activities split between two new regulators.

New revised distribution of firms

The new Financial Conduct Authority (FCA) will focus on getting a fair deal for consumers. It will regulate the conduct – the way a firm behaves and interacts with its customers – of some 27,000 firms, as well as the prudential supervision of around 24,500 firms.

The new Financial Conduct Authority (FCA) will focus on getting a fair deal for consumers. It will regulate the conduct – the way a firm behaves and interacts with its customers – of some 27,000 firms, as well as the prudential supervision of around 24,500 firms.

The new Prudential Regulation Authority (PRA), a subsidiary of the

Bank of England, will be responsible for ensuring our

financial system is stable. It will supervise the ‘safety and

soundness’ of around 2,000 firms.

The new Prudential Regulation Authority (PRA), a subsidiary of the

Bank of England, will be responsible for ensuring our

financial system is stable. It will supervise the ‘safety and

soundness’ of around 2,000 firms.

8

FSA Unrestricted

UK Regulatory Architecture (post legal

cutover Mar 2013)

Prudential Regulatory Authority

(PRA)

Financial Conduct Authority

(FCA)

Data Sharing

4.1. Impact on data exchange

Data exchange arrangements post regulatory reform, CRD IV & SII implementation are likely to get more complex.

FC

A R

eg

ula

ted Professional Entities

Insurance

Not SpecifiedOpen-ended investment company

(OEIC)

Investment Managers

Services (UK) of an Overseas FirmAdvising, Arranging & Dealing as

agent

Others

Branch (UK) of a Overseas Firm

BankingAdvising, Arranging & Dealing as

agent

Insurance

Services (UK) of an Overseas Firm

Insurance Firms

Deposit Takers

Others

PR

A /

Du

al

Re

gu

late

d

European Banking Authority

(EBA)

European Insurance & Occupational

Pensions Authority(EIOPA)

European Securities &

Markets Authority(ESMA)

UK Regulatory Bodies

H.M. Treasury

Bank of England

HMRC

MIF

ID (

cir

ca

46

00 f

irm

s)

TRUP / FPML

XML / Ad Hoc

XBRLXB

RL

XBRL

TRUP /

FPMLXBRL

CR

D I

V (

cir

ca

. 2

800

fir

ms

)

XML /

Ad Hoc a

nd

Unstru

cture

d

Co

ns

um

er

Co

nd

uc

t &

Pru

de

nti

al

Su

bm

iss

ion

s (F

ina

nc

ial S

erv

ice

s B

ill

201

2)

TBC

??

Pru

de

nti

al

no

n-C

RD

Su

bm

iss

ion

to

PR

A

XBRL

So

lve

ncy

II

(cir

ca

. 6

50

firm

s)

9Copyright © The FSA, UK, 2012

FSA Unrestricted

5. Potential benefits

10