Case Study

Regulatory Reporting

Background
The Reserve Bank of India (RBI), India's central bank, oversees a host of critical activities including monetary policy, bank supervision and foreign exchange management. RBI is internationally well regarded for its regulatory acumen that played a key role in the Indian financial sector remaining virtually unscathed during the Asian Financial Crisis and the ongoing international banking and credit crisis. India's central bank has an exemplary regulatory mechanism for banking supervision, a key component of which is the collection of information from banks across a large set of parameters on a frequent basis. Over the past few years, a large part of the collection of this information has migrated to an electronic online system as well. The RBI has been a pioneer in the use of information technology and it is no surprise that the central bank has turned to XBRL (eXtensible Business Reporting Language) in its effort to capture quality information that can be reused across the regulatory functions. Though the current reporting system is functioning well, the RBI was clear that in order to enhance the quality and reusability of data and to build the flexibility to easily accommodate future regulatory data needs, XBRL is the natural choice. The remarkable savings in time and the significant increase in the quality of information captured through the XBRL reporting systems of the FDIC, USA, Bank of Japan and the European Banking Supervisors was a pointer in this direction too. The RBI also realized that the creation of a comprehensive taxonomy for the Indian banking sector would help the banks' internal reporting as well where they can leverage the power of XBRL. As the RBI embarked on a plan to migrate the entire bank regulatory reporting into an XBRL framework, there also emerged a need to capture a significantly enhanced set of information from the Indian banking system that conforms to the Basel 2 standards (which the RBI calls as Return on Capital Adequacy RCA2). The XBRL project was conceived with the accent on a phased approach starting with the RCA2 returns and then moving on to financial and liquidity related information sets. It was also decided that to quickly get the reporting banks to file in XBRL, a user friendly software (that does not expose the XBRL tags) will be supplied by RBI itself which can be used by the banks to file information. IRIS Business Services is a global XBRL solutions provider based out of India. IRIS combines the expertise in designing end to end XBRL information systems including the creation of XBRL taxonomy as well as providing the complete software that creates, validates and renders XBRL instance documents. IRIS' XBRL product framework, I-File can be customized to meet the varying requirements of regulators across capital markets, banking and related areas. At the beginning of the RBI's XBRL project, IRIS was called upon to play a consulting role in helping the RBI to look at global trends in XBRL based bank regulatory reporting and to build a proof a concept - both of which helped to create the roadmap for the migration of the existing reporting system to XBRL. Later on IRIS was selected by the central bank to build the XBRL reporting system initially for RCA2, and to cover financial and liquidity related information sets.

IRIS Business Services Limited

The Challenge
The path to creating an XBRL reporting solution for the RBI had multiple challenges. The Basel 2 reporting norms were new and in the process of finalization. The reporting requirements also had many parameters unique to the Indian context. The XBRL taxonomy creation was tricky in the sense that the reporting information was multi dimensional and spanned across sixteen reporting templates. The paramount need to have high quality data (100% accurate) from Banks required a number of validations using both taxonomy and business rules. India had no XBRL taxonomy for its accounting standards at that time (IRIS was working parallel on this with Institute of Chartered Accountants of India in building an XBRL taxonomy for the country). In an ideal situation the RCA2 taxonomy would have been an extension of the core XBRL taxonomy that was yet to be created. The solution envisaged two software components, one used for creating the XBRL instance document at the reporting bank's end the other, server side software at the RBI data centre that accepted valid XBRL instance documents. It also included a complete workflow for the reporting banks and the user departments of the RBI. The two software components worked on different technology platforms compounding the technical effort that was required to build and integrate both while conforming to the look and flow of the central bank's existing online information capture system that the reporting banks were using. Finally, the project was running on very tight deadlines. The RBI was looking at commencing UAT at the end of three months from award of work. Given that the taxonomy creation was iterative as the RBI was still in the process of finalizing the reporting elements, the time available for finalizing the taxonomy and incorporating that in the software at the reporting bank's end was even shorter.

IRIS Business Services Limited

The Solution
IRIS' XBRL reporting solution architecture is depicted below in the diagram. Essentially, the solution has two components, one at the reporting bank's level (i-File Client) and the other at the RBI (i-File Server). Reporting Bank
Intelligent Spreadsheet Web Applications Set

RBI
Data Repository Report Generation Engine

Digital Signer & Encryptor Instance Document Generator

Bank Admin Module Validation Engine

(Taxonomy & Cross Context Validations)

XBRL Document Repository

Ad Hoc Reports Generator

Validation Engine

Taxonomy Template Files

Instance Document Processor

(Move to XBRL Repository/Store in Database)

XBRL Database
XBRL Database

Pre-defined Reports Generator

BASEL II Template Generator

RBI Admin Module

The RCA2 reporting framework incorporates sixteen templates covering capital details, credit risk, market risk and operational risk with more than 500 reporting items. At the reporting end, the banks are given the i-File Client, a Microsoft Excel add-in with the XBRL tags embeded within the Excel template sheets. The taxonomy and rest of the linkbase files are kept seperately in a file system. The reporting banks download the i-File Client application from the RBI portal. Once installed, the client application creates an Excel template file. All the banks need to do is to open the spreadsheet and fill in the data points. At the time of opening the spreadsheet, the application connects to the servers and checks for the latest version. If not the latest version, then it would prompt the user to download the latest version of the application. The bank can also route the i-File Client based Excel sheets to different departments for filling in the information. Once completely filled, the reporting banks could generate the instance document from within the i-File Client itself. The instance document is then validated at the client end and encrypted using the filer's digital signature. IRIS' soultion also has the flexibility offered to the banks to use any standard XBRL software to generate the instance document using the RBI's taxonomy documents. This instance document then could pass through the iFile Client for validation and upon validation, the i-File client can encrypt the document and upload to RBI's portal which is built with the i-File Server components. The i-File Server side components includes: An administrator module to manage users including filing banks and RBI's different departments.. Validation engine to validate the instance document once again. Data repository for storing the filed information. Data is stored in native XBRL files as well as shredded and stored in a relational database. Reporting module for generation predefined and adhoc reports for multiple use across the central bank.

IRIS Business Services Limited

Promise and Performance Delivered

IRIS deployed an interdisciplinary team for this pioneering project that included accountants with taxonomy building expertise, software product architects and programmers. The team collaborated with a task force from the RBI culled from multiple departments. The taxonomy creation process benefitted from inputs from experts at the Bank of Spain as well helping the team to adopt the best practices followed in other successful XBRL projects such as that in Europe. The taxonomy was built over a period of two months and submitted for testing and validation at the RBI. Internally, IRIS tested the taxonomy with proprietary and third party XBRL software tools. At the same time, the client end software was built using the I-File framework and the newly built taxonomy. The client end software was handed over to the RBI for testing with the reporting banks within a period of three months. While the i-File Client was built on the Micrsosoft Visual Studio.NET (development environment), the i-File Server components were intially built on the Windows Server platform and then migrated to a Java environment. Dr. Ramasastri, Adviser, who spearheaded the XBRL movement at the RBI, had this to say Let me at the outset congratulate IRIS for completing the first part of the project on XBRL-based Data Reporting by Banks to Reserve Bank of India. We believe that XBRL taxonomies developed by IRIS for Basel II reporting would become the basis for taxonomies to be developed for other reporting systems. We find the system developed by IRIS for us to be meeting most of our requirements. We also find it to be quite user-friendly at banks level. Going forward, IRIS is working with the RBI to build additional taxonomies for extending the XBRL reporting framework to cover new returns. Reporting banks, keen to embrace XBRL to enhance internal MIS systems and to facilitate quick reporting to the central bank, are speaking to IRIS as well at the possibility of deploying XBRL framework internally.

IRIS Business Services Limited