FRSGlobal : Risk Analysis and Regulatory Reporting

Regulators in Poland

The supervisory and regulatory framework in Poland consists of:

• The National Bank of Poland, Narodowy Bank Polski (NBP)
• Polish Financial Supervisory Authority (PFSA)

FRSGlobal in Poland

Poland is the only economy in the EU to have escaped a recession in 2009. However, similar to its regional peers, Poland did experience over-spill from the crisis with the abrupt slowdown in capital inflows, causing a crunch and a sharp decline in investment.

The Polish banking system has withstood the crisis reasonably well, while facilities for exceptional liquidity support have been phased out.

Profits remained robust in 2009, reaching about two thirds of the record-high level of the preceding year which has meant that banks have recently started to ease lending policies for housing loans and short-term corporate credits and resumed foreign-currency lending, especially for Euro-denominated mortgages.

The key challenges facing Poland is Balance of Payments (BoP) and International Investment Positions which came into force in April 2010.These resolutions have introduced 33 new reports that include:

• Replacement of the current reporting system BoP-RZ;
• Banks will have to report only on their own aggregated data on foreign assets and liabilities;
• Reports will be based on a new template and will need to be submitted in XML format;
• Reports will need to be delivered electronically via the new reporting portal of the National Bank of Poland;
• It will also be possible to complete the template online on the new portal of the National Bank of Poland.

Regulatory Environment — Poland

Statutory

FINREP
FINREP is used for the largest part of the periodic financial information gathered by the National Bank of Poland (NBP) for its supervision. FINREP includes both consolidated and non-consolidated reporting. FINREP for Poland includes IAS (International Accounting Standards) and PAS (Polish Accounting Standards) specific reports. For non-consolidated reporting, the balance sheet, profit & loss (only main report) needs to be reported monthly, whereas profit & loss (detailed reports), cash flow and changes in capital statement need to be reported quarterly. Consolidated reports are reported quarterly. Banks are also obliged to deliver within the monthly package the daily Foreign Exchange position (calculated for each day separately but on the same dynamic report).

Obligatory reserve (PD reports)
Obligatory reserve reporting is delivered to NBP each month and is prepared on daily data. This type of reporting consists of four reports and contains information on selected bank’s liabilities.

Prudential

COREP
The NBP uses COREP for collecting periodic solvency-related information as part of its prudential supervision. This reporting is in two parts non-consolidated reports (required monthly or quarterly) and consolidated reports (required quarterly). Credit risk and Market risk calculations are based on the standardised approach while operational risk calculations are based on the basic indicator approach in Poland .

Large Exposures Reporting
Exposures over 10% of own funds of a bank are required to be reported on quarterly basis to the National Bank of Poland through B0300 returns.

Statistical

WEBIS (Banking Reporting Information)
WEBIS reporting is used by NBP to set up the monetary policy and to gauge the monetary situation of the country. Currently, the range of required information comprises balance sheet positions.. WEBIS reporting frequency is monthly.

Transactional

IIPBOP (International Investment Position and Balance of Payments)
The National Bank of Poland obtains information about international investment positions and balance of payments through IIPBOP reporting. The NBP requires IIPBOP reports to be submitted on daily basis.

What’s coming Up — Poland

COREP and Large exposures

In accordance with Article 74 of Directive CRD, the EBA will publish new COREP reports by 1 January 2012. The new reports will contain all the changes resulting from subsequent amendments of the Directive CRD (II, III and IV), including reporting on large exposures.

Until the implementation of the final package of COREP reports, reporting of large exposures in Poland will be separate from COREP within the SIS system.

Reports for large exposures are being implemented in Poland in accordance with recommendations of the EBA (European Banking Authority). This requirement is specified in the amended Resolution No. 23/2003 of the NBP regulation.

The NBP has prepared a separate package of XBRL taxonomies as reports for large exposures are of a new type. The package includes two main LE01 and LE02 forms or reports and additional standard forms containing information on the persons preparing and approving these reports. Data in the reports should present the large exposures, on solo and consolidated basis. Both reports are to be compiled on a quarterly basis.First reporting of large exposures reports is scheduled for October 2011 based on June data.

Reporting data in unified COREP will be the same in all European Union countries, therefore the NBP will not modify anything substantially. Reports will be only translated, and the taxonomy XBRL will be complemented by a layer of polish labels and references to Polish Law.

FINREP

Publication of the final version of FINREP for consolidated reporting is planned by the EBA by the end of 2011. The new FINREP package is based on new requirements IAS/IFRS, of which a substantial part is still under development of IASB. Similar to COREP, consolidated FINREP reports will not be modified by the NBP, except for translation into Polish, and some extensions in the XBRL taxonomy (labels and references to Polish Law). So far, no decision has been taken about possible changes and deadlines in solo FINREP reporting.

Webis changes

There are also plans to change the reports B0300 and B0701/2 (Webis reports). They are supposed to be moved from the BIS system to the SIS system. Currently talks are underway to determine the scope of the content of a new NB300 form. After it has been determined it will be sent to banks for consultation purposes. Implementation of the NB300 form and some other changes at the end of 2012 will allow building a new XBRL taxonomy, fully integrated with new the standard of XBRL taxonomy for FINREP and COREP (including large exposures).

Other Changes

Beside those important changes there will be some modifications in the XBRL taxonomy. The architecture of the taxonomy is expected to change, layers of formulas and rendering will also be introduced.

Most of this should be done in 2012 (including testing solo and consolidated COREP and consolidated FINREP reporting).

CEBS change over to EBA

The European Banking Authority (EBA) came into effect from 1 January 2011 and took over the responsibilities of Committee of European Banking Supervisors (CEBS). EBA is responsible for safeguarding public values such as stability of the financial system, transparency of markets and financial products, protection of depositors and investors wealth.

Financial Reporting (FINREP)

The aim of FINREP has always been to harmonise the financial reporting within the member states to improve comparability. However after implementation it has become apparent that the large number of national discretions has prevented to reach this goal. With the announced adjusted guidelines, the member states are obliged to apply at least the balance sheet and P&L statement and can choose out of 23 additional templates to apply. However CEBS insists that on all templates that the national regulator adopts, no changes should be made to its meaning or appearance.

Further it asks the member states for a firm commitment that the FINREP reporting will be the only consolidated financial reporting that an individual banking group has to provide to the regulator. Also the scope of consolidation will need to be aligned with the CRD.

Common Reporting (COREP)

In general the adoption of the COREP templates has been more straightforward between the member states than FINREP. However there have been still numerous differences. Here CEBS intends to align this further medium term with clearer definitions and tuning of the COREP templates.

Large Exposures is included in the COREP framework with the revised guidelines. It will be applicable as of 1st of January 2011, but only move into a binding core reporting framework as of 31st December 2012.

Read our data sheet for more information on the Large Exposure Reporting requirements

Concentration risk

Draft guidelines have been published on a revision of the concentration risk reporting. The most notable change is that reporting on concentration risk within an individual risk type (intra-risk) is considered to be insufficient. It pleas for reporting based on risk interaction (inter-risk) and would be related to credit, market, operational and liquidity risks.

Read the comment piece “CEBS pushes forward with reporting harmonisation agenda” for more information on the new requirements and their impact on financial institutions »

CEBS stress testing

Read the comment piece "CEBS stress testing" which looks at the results of the CEBS EU-wide stress testing exercise of July 2010, compares them with the previous US and UK FSA stress testing results, and looks at what the market can glean from them »

Solvency II

Solvency II is a fundamental and wide-ranging review of the capital adequacy regime for the European insurance industry. It represents both a challenge and an opportunity for European insurers. Globally it is scheduled to come into effect by 31 Dec 2012..

The project initiated by European Commission as an advancement to Solvency I is expected to enhance a revised set of EU-wide capital requirements and risk management standards..

The objective of new system is to introduce more sophisticated solvency requirements for insurers, in order to guarantee that they have sufficient capital to withstand adverse events, such as floods, storms or big car accidents..

Currently, EU solvency requirements covers insurance risks, whereas in future insurers would be required to hold capital also against market risk (e.g. a fall in the value of an insurer's investments), credit risk (e.g. when debt obligations are not met) and operational risk (e.g. malpractice or system failure). This will help to increase their financial soundness with implementation of sound economic risk management practices in insurance industry.

With a demand of more streamlined approach towards supervision, the new system would enable insurance groups to be supervised more efficiently, through a 'group supervisor' in the home country that would have specific responsibilities to be exercised in close cooperation with the relevant national supervisors.

The introduction of group supervisors would ensure that group-wide risks are not overlooked and would enable groups to operate more efficiently, while providing policyholders with a high level of protection. Groups that are sufficiently diversified may also be allowed to lower their capital requirements under certain conditions.

The Directive often referred as Basel II for insurers is based on a three pillar approach which is similar to the banking sector (Basle II) but adapted for insurance.

The new provisions of Solvency II will be adopted under the Lamfalussy process:

Level 1 – Solvency II directive includes overall framework principles developed by European Commission approved by European Parliament and European Council.

Level 2 –Includes introduction to implementation measures developed by European Commission and approved by European Insurance and Occupational Pensions Committee (EIOPC)

Level 3 –Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) will guide European Commission to enhance supervisory standards.

Level 4 –European Commission will finally monitor, Compile and enforce the regulation regime.

Maximum harmonization is assumed with the new Solvency II framework Directive. This means the European rules will be implemented all countries of the European Economic Area (i.e. the EU plus Iceland, Liechtenstein and Norway). The European Union’s Committee of European Insurance and Occupational Pensions Supervisors (CEIOPS) has recommended to the European Commission that Bermuda, Switzerland and Japan will be the first countries assessed for equivalence with EU insurance regulations under Solvency II.

Thus the new solvency II requirements with challenges and opportunities ahead will be more risk-sensitive and more sophisticated than in the past, thus enabling a better coverage of the real risks run by any particular insurer.