Regulatory reporting refers to the submission of data to regulatory authorities by financial institutions, such as banks, to comply with regulatory requirements. In Europe, regulatory reporting is governed by the European Banking Authority (EBA) and the European Securities and Markets Authority (ESMA).
The reporting requirements for European banks are set out in a number of different regulations, including the Capital Requirements Regulation (CRR), the European Market Infrastructure Regulation (EMIR), and the Markets in Financial Instruments Regulation (MiFIR).
The data that banks are required to report varies depending on the regulation, but typically includes information about their capital adequacy, risk exposures, liquidity, and transactions. Banks must submit their regulatory reports to their national competent authority (NCA) in the country where they are headquartered. The NCA is responsible for verifying the accuracy of the data and forwarding it to the relevant European Union authority.
To meet these reporting requirements, many European banks have implemented specialized software solutions that can collect and process data from a variety of sources, and generate the required reports in the necessary format.
Types of Reports
The type of reports that European banks must submit to regulatory authorities depends on the specific regulation or directive they are subject to. Here are some examples of the most common types of reports that European banks may be required to submit:
Capital Adequacy Reports
These reports provide information on the bank’s capital position, including its capital ratio, risk-weighted assets, and capital buffer requirements. In this manner, Pillar 3 Disclosure Report is a set of reports that provides additional information on a bank’s capital position, risk exposures, and risk management practices, as required under the CRR.
COREP stands for Common Reporting (COREP) is a set of reports that provide information on a bank’s capital position, risk-weighted assets, and other metrics required under the Capital Requirements Regulation (CRR). COREP is a key component of the European Banking Authority’s (EBA) supervisory reporting framework for European banks. Banks are required to submit COREP reports on a quarterly basis, with a subset of the reports due on a monthly basis. COREP reports cover a wide range of data related to a bank’s capital adequacy, including information on its capital base, RWAs, risk exposures, and leverage ratio.
COREP reports consist of a series of templates that are standardized across all European Union member states, to ensure consistency and comparability of data. There are currently around 70 different COREP templates, covering different areas such as credit risk, market risk, operational risk, and securitization.
COREP reports must be submitted by all European banks that are subject to the CRR. This includes all banks that are authorized to take deposits or provide credit in the European Union, as well as some investment firms. Banks must file COREP reports electronically using XBRL (eXtensible Business Reporting Language), a standardized format for financial reporting. The reports are submitted to the bank’s national competent authority (NCA), which then forwards the data to the EBA.
COREP is an important reporting framework that helps ensure that European banks have adequate capital to withstand financial stress and mitigate risk. The standardized nature of the templates and reporting process helps promote transparency and comparability of data across different banks and jurisdictions.
Financial Statement Reports
Banks must prepare and submit annual financial statements to their national competent authorities, as well as to the relevant European Union authorities, in accordance with the International Financial Reporting Standards (IFRS). FINREP stands for Financial Reporting, which is another set of reports that European banks are required to submit under the Capital Requirements Regulation (CRR). Unlike COREP, which focuses on a bank’s capital position and risk-weighted assets, FINREP reports provide information on a bank’s financial position and performance, including its income, expenses, assets, and liabilities.
Banks are required to submit FINREP reports on a quarterly basis too, with a subset of the reports due on a monthly basis. FINREP reports cover a wide range of financial data related to a bank’s balance sheet and income statement. This includes information on its assets and liabilities, revenues and expenses, impairment losses, and other financial items.
FINREP reports consist of a series of templates that are standardized across all European Union member states. These reports must be submitted by all European banks that are subject to the CRR. This includes all banks that are authorized to take deposits or provide credit in the European Union, as well as some investment firms.
Similar to COREP, banks must file FINREP reports electronically using XBRL (eXtensible Business Reporting Language), a standardized format for financial reporting. The reports are submitted to the bank’s national competent authority (NCA), which then forwards the data to the European Banking Authority (EBA). FINREP reports consist of several different templates that provide information on a bank’s financial position and performance. Here are some of the main types of FINREP reports:
Balance Sheet Templates: These templates provide information on a bank’s assets, liabilities, and equity. The templates cover a wide range of items, including cash and cash equivalents, loans and advances to customers, financial assets, and various types of liabilities.
Income Statement Templates: These templates provide information on a bank’s revenues and expenses. The templates cover a wide range of items, including net interest income, net fee and commission income, gains and losses on financial instruments, and various types of expenses.
Other Comprehensive Income Templates: These templates provide information on a bank’s other comprehensive income, which includes items that are not included in the income statement. The templates cover a wide range of items, including changes in the value of financial assets available for sale, changes in the value of cash flow hedges, and foreign currency translation differences.
Off-Balance Sheet Exposure Templates: These templates provide information on a bank’s off-balance sheet exposures, which are items that do not appear on the balance sheet but still represent potential liabilities. The templates cover a wide range of items, including guarantees and other contingent liabilities, commitments to extend credit, and other types of off-balance sheet exposures.
Capital Adequacy Templates: These templates provide information on a bank’s capital position, including its regulatory capital ratios, risk-weighted assets, and other metrics related to capital adequacy.
FINREP reports provide a comprehensive picture of a bank’s financial position and performance, which is essential for regulators to assess the bank’s solvency and overall risk profile. The standardized templates and reporting process help ensure that the data reported by banks is comparable and transparent, which is important for market discipline and maintaining confidence in the banking system.
Other Obligatory Reports
Liquidity Reports: These reports provide information on the bank’s liquidity position, including its liquidity coverage ratio and net stable funding ratio. Furthermore, Additional Liquidity Monitoring Metrics (ALMM) is a set of reports provides information on a bank’s liquidity position, including its liquidity coverage ratio (LCR) and net stable funding ratio (NSFR).
Large Exposure Reports: These reports provide information on the bank’s large exposures to individual counterparties, as required under the CRR.
Asset Quality Review (AQR) Reports: These reports are used to assess the quality of a bank’s assets, including its loan portfolios, and are required under the European Central Bank’s Comprehensive Assessment process.
Transaction Reporting: Banks must report certain types of transactions, such as derivatives trades and securities transactions, under the European Market Infrastructure Regulation (EMIR) and the Markets in Financial Instruments Regulation (MiFIR), respectively.
These are just a few examples of the many types of reports that European banks may be required to submit to regulatory authorities. The specific reporting requirements can vary depending on the size, complexity, and risk profile of the bank, as well as the regulatory framework it operates within. In addition to these reports, European banks may also be required to submit other types of regulatory reports related to their capital adequacy, liquidity, and risk management, depending on their specific regulatory framework and the size and complexity of their operations.
Non-compliance with regulatory reporting requirements can result in significant fines and reputational damage for banks, so ensuring accurate and timely reporting is a top priority for these institutions.
