The technical nature of changes to the way the Financial Services
Authority collects its data means responsibility for ensuring
submission is likely to fall to IT directors
This year will see the beginning of a long process of change to the
way the Financial Services Authority collects its data.
One of the main changes will be the introduction from April 2005 of
electronic reporting of complaints data, and from July 2005 of an
integrated regulatory return (IRR) for firms undertaking mortgage
lending, administration and retail mediation activities.
The IRR will combine all the data the FSA requests into one return,
helping organisations to monitor data more effectively and reduce
costs. It is the FSA's intention that all firms will submit
financial reports electronically by 2007.
Following a successful pilot by KPMG, the FSA has decided to use
XBRL (Extensible Business Reporting Language) to collect, validate
and distribute the data in the IRR.
According to the FSA, the new IRR will be based on the type of
business firms undertake and will align reporting periods with
financial years, enabling firms to use the financial information
they have already generated for business and regulatory
purposes.
The ultimate benefits of these changes are clear, but what steps
should firms be taking to ensure they are prepared?
Two routes will be available. Firms can either use the web-based
form provided by the FSA to manually enter the data, or they can
implement a system from a supplier to facilitate an XBRL-compliant
system-to-system data transfer to the FSA. Firms will also be able
to develop their own systems in-house.
For the IT directors of financial services companies the most
striking change will be the shift in responsibility. The technical
nature of the standards will make IT directors accountable for
timely submissions, and they will need to decide between these two
report submission routes.
Further challenges could include dealing with the existence of
multiple data systems and ensuring that system developers are
adequately trained in XBRL. IT directors will also need to read the
FSA's Policy Statement 04/9 to ensure they understand the FSA's
data requirements and the timescales involved.
The FSA is trying to ease potential headaches by making technical
specifications and a basic taxonomy testing service available
online. In addition, suppliers will be disseminating the business
benefits of reporting using system-to-system technology and
supporting regulated firms by providing XBRL-enabled
applications.
Suppliers' organisation Intellect feels that many firms will
initially use the web form but will quickly realise that a
supplier's system will be far quicker and more efficient as there
are potential efficiency gains to be made by automating data
collection and collation.
To this end, Intellect has become a member of the FSA's Software
Suppliers Advisory Panel. The aim is to establish a common
understanding of these standards and to act as a conduit for
communication, ensuring that all parties are comfortable with the
technology choices and that the project goes smoothly.
It may may also be of interest to note that the Inland Revenue is
implementing XBRL for online submission of corporation tax returns.
The Revenue also currently provides recognition of suitable
software on its website, but not recommendation. The Bank of
England has a similar arrangement.
The most important aspect of this process is for firms to remember
that although they need to adhere to the FSA requirements, there
are business advantages to be gained from compliance, such as
reduced administration costs.
Beatrice Rogers is head of private sector at
Intellect
FSA technical
specifications
www.fsa.gov.uk/regulatory_reporting