Submitting and reviewing banks' quarterly call reports is a complicated task, but the Federal Deposit Insurance Corp. says a shift to a different file format has dramatically simplified the process.
Bank regulators have long published their instructions for submitting call reports in a variety of file formats, which made the reporting software packages used by banks error-prone.
For the third quarter regulators began issuing instructions only in XBRL, or extensible business reporting language. Martin Henning, the associate director of the FDIC's statistics branch, said the switch has had impressive results.
For the second quarter, the last in which the old reporting system was used, 60% of call reports were considered "clean" four weeks after the quarter ended - that is, they had been fully reviewed, the math checked out, and any anomalies had been explained. Four weeks after the third quarter ended, 90% of the call reports were clean, and the number of problematic filings fell, from 3,300 to 820.
This has made things easier for the people who review the reports, and the agencies can then make the banking data public faster. "There is a time value to information like this, not only for our analysts internally but also to folks outside the agencies, who use that information to make investment decisions," Mr. Henning said.
XBRL uses standardized data tags to identify items of information for processing. The quarterly call reports, which are used to assess the financial health and risk profile of banks and credit unions, use the format to identify 2,600 variables that are either included in the report or are needed to process the information.
The XBRL conversion was spearheaded by the Federal Financial Institutions Examination Council. It has been so successful, said David W. Skidmore, a spokesman for the Federal Reserve Board, that the FDIC and other agencies are considering the file format for other banking reports, though there is no firm schedule for any other project.
XBRL is catching on for other uses as well. On Jan. 11, Securities and Exchange Commission Chairman Christopher Cox asked for volunteer companies to test XBRL for corporate financial reporting.
And European banking regulators are meeting this week to discuss adopting XBRL for their own bank reporting requirements.
Daniel Roberts, the national director of assurance innovation at the accounting firm Grant Thornton LLP, said the FFIEC effort was the first major XBRL project in this country. "They've proven that somebody can do it," he said. "2006 is going to be the year that proves that XBRL is going to deliver the promises that it claimed."
Mr. Roberts is also the chairman of the XBRL-US Steering Committee, a consortium of companies that are promoting the format as a standard for financial reporting. He said that releasing call report data faster could help bankers gain better insight into their competition - for example by seeing the impact a rival's new advertising campaign had on its deposit growth.
"I used to have to wait close to six months to know that definitively," Mr. Roberts said. "Now I'm going to know in three and a half or four months. I can be more nimble and respond faster to activities of my competitors, because I know how they are affecting me."
Mr. Henning said XBRL tags are used in two ways - to provide definitions of items, quality standards, and instructions that vendors use to produce reporting software for their bank customers, and then to tag the reports that the banks submit using that software.
In the past, instructions were published in a variety of formats, including using Microsoft Corp.'s Word documents and Excel spreadsheets, and Adobe Systems Inc.'s portable document format. "It was prone to error, very manual," Mr. Henning said.
Though the reporting software automated the process, it was still possible for banks to submit reports that failed to meet the regulators' quality standards, such as ensuring that a bank's assets equaled its liabilities plus its equity.
The conversion to XBRL involved tightening the software to meet those quality standards. If a report fails those tests now, the software will not transmit the file to the FFIEC's Central Data Repository, a shared archive for these reports.
Switching to XBRL also enabled banks to include explanations for items that might stand out - if assets doubled from one year to the next, for instance. Historically these types of figures would prompt regulators to call the bank for an explanation, Mr. Henning said. Now bankers can incorporate the explanation into the filing, such as an acquisition that drove up assets.
Having more reliable data and having it sooner allows the FFIEC to accelerate its own reporting schedule. With the fourth-quarter numbers, it began publishing its Quarterly Banking Profile report three weeks after the end of the quarter instead of four.
For banks the shift has been largely invisible because they typically use reporting software packages from vendors. These packages must be updated often - sometimes every quarter - as regulators change their requirements. But the screens bankers see as they enter data have changed little, said James W. Sizemore, a senior vice president and the chief information officer with Information Technology Inc., a unit of Fiserv Inc.
For the vendors, though, the move to XBRL was significant.
"We've had to work hard to rewrite a system," Mr. Sizemore said. But the reporting software is easier to update now that the conversion to XBRL is complete, because he can incorporate the code for new instructions directly into the software. "You can dynamically add data into it without having to rewrite it," he said.
Esteban Castorena, the product manager in Jack Henry & Associates Inc.'s regulatory filing group, said his company is already converting its other regulatory filing software to XBRL, anticipating that other agencies will begin using the format.
For example, "it would be really easy to implement the Y-9 reports," a set of Federal Reserve filings for large banking companies, Mr. Castorena said. "I hope everybody goes into XBRL."
