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