An overwhelming concern with the draft technical standards is the timing. Radically new reporting requirements, as COREP and FINREP templates are, require systems alterations and testing, both of which usually take a minimum of 12 months. Our larger members tend to be the only ones which have started work; they are concerned that they are having to work with draft versions of the templates. Smaller members do not have the resources to review drafts and will have to rely on software providers. These will be under pressure themselves and may not be able to provide an adequate service in the necessary time. All our members are vulnerable to the costs of iterative projects should the drafts be changed.
Our members are concerned with the level of development and understanding required to comply with the new templates, particularly as they will not be finalised until later in 2012. Even if our members have only to report part of the total information, they still have to review all the templates and data items to ensure nothing is missed.
We therefore suggest a delayed or phased implementation. That way, the EBA has a better chance of receiving meaningful data.
Another major concern is proportionality. The aim of harmonised reporting is to check the adequacy of solvency ratios in credit institutions and investment firms. The European Banking Authority says that harmonised reporting is driven by increased cross-border activity in Europe and integration in financial markets. If that is the case, why are domestic institutions affected by it? Surely such reporting is applicable only to those institutions which operate outside of their home country? The EBA goes on to say that the changes will bring a reduced reporting burden on cross-border institutions with centralised risk management systems. That it might do, but purely domestic institutions such as mutuals do not have such a reporting burden to reduce in the first place.
We therefore question why European domestic institutions need to be affected by the proposals. They have different characteristics according to the business environment, culture and law within which they operate. Not only are they hard to compare, any resulting data runs the risk of being meaningless.
Click below to read the full response:
Our full response to the EBA's CP 50