by John M. Covaleski
New York - XBRL, the fledgling programming code for transmitting and retrieving business report data over the Internet, has found a new, major user.
The Federal Deposit Insurance Corp., the insurer and overseer of some 9,000 banks and other savings institutions, plans to release the draft of an XBRL code for gathering "call report" financial information from its members in September. That release is part of the FDIC’s grand plan to have all call reports - periodic financial reports mandated by the FDIC - coded in XBRL and submitted to a planned data repository.
The repository will utilize XBRL systems to make the data available to all interested parties, such as bank industry analysts, state banking commissions and the federal government’s savings industry watchdogs, the Federal Reserve Bank and Comptroller of the Currency. Edgar Online, the provider of financial information derived from United States Securities and Exchange Commission data has created a similar XBRL repository from which interested parties can access public company financial reports.
The FDIC program has stirred expectations of creating wider-spread market aware-ness of XBRL. Executives of XBRL’s development group, XBRL International, are hopeful that the FDIC project will encourage banks to implement XBRL in technologies that they use
in communicating with customers, which would then make those business and individual customers more aware of XBRL.
"What we are looking for is for this to have a cascading effect," said Louis Matherne, an American Institute of CPAs representative on XBRL International, based here. In 1998, the AICPA created the XBRL group with a core of about 60 members, primarily from the North American accounting and technology industries. The group now has well over 100 members, which include representatives from several countries and additional industries, such as publishing. Members include several units of the Thomson Corp., which owns the publisher of Accounting Today.
The FDIC programs are XBRL’s second big move within the banking industry. Earlier this year, Bank of America, the nation’s third-largest bank, launched a pilot program in which financial reports from its commercial client’s file are in XBRL format. There is no information available on the success of that program from either the bank of the XBRL group.
XBRL is a derivation of extensible markup language, or XML, which is rapidly replacing HTML as the prominent Internet industry framework. XML codes, such as XBRL, describe data and establish individual "tags" for specific elements in structured documents; the tagging allows specific elements in financial reports to be immediately accessed and grouped to meet the needs of users, which in financial reports, includes lenders, regulators, investors and analysts.
The work by the FDIC and Edgar Online are the first development of XBRL to meet the specific needs of a regulatory group in the United States. XBRL International has been developing several versions or "taxonomies" of XBRL for specific industrial segments. Its greatest progress so far has been in developing a commercial-industrial, or CI, taxonomy.
The FDIC effort is similar to a program that is already underway in Australia, where the nation’s financial services industry regulator, the Australian Prudential Regulation Authority, launched a program to gather and store regulatory data in XBRL format last year. By year’s end, it hopes to expand it to its entire universe of more than 11,000 banks, insurance companies and pensions funds.
Matherne said that the APRA program has already had a "cascading" effect of encouraging banks there to implement XBRL internally. However, a spokesman for APRA was unavailable for comment.
The FDIC’s call report taxonomy would not directly benefit banks because their work in compiling call report information will not change. The only change would be behind the scenes in the software that is used to create the reports.
The biggest benefit from the call report project would be the users of that information, because the XBRL format will enable them to retrieve and group data instantaneously versus the current spreadsheet-based, manual process. The quicker access could, for example, enable regulators to more quickly detect when an institution is in financial difficulty, and take corrective action.
"Our chairman [FDIC chairman Donald E. Powell] has said that we should be the leader of the industry and XBRL is an opportunity to lead in a crucial way, so we are taking advantage of it," said Phil Walenga, the FDIC’s assistant director of technology and its representative to XBRL International since 1990.
The FDIC has scheduled an XBRL conference in Washington, for Sept. 23-25, where it will release the initial versions of its Call Report XBRL taxonomy for public comment, Walenga said. The FDIC is also developing tools that would enable the banking industry’s call report vendors to add the XBRL programming into their products.
At about the same time, XBRL international plans to release an "extension" to its CI taxonomy that for the financial reports that banks require from their commercial loan clients.
Walenga concurred that the regulators would achieve great benefits from XBRL, but he also agreed with Matherne’s speculation about a possible cascading effect in which the project increases banks’ and the general market’s awareness of XBRL.
The call report software industry is prepared. The three leading vendors, which control an estimated 90 percent of the market, all said that they expect to be able to implement in line with the FDIC’s schedule and that they do not expect the change to disrupt their bank industry users. Those users are typically banks’ accounting departments.
"The concept is great and our programmers like it. We’ll be ready when the FDIC wants us," said Ken Lemoine, vice president of the call report software division of Atlanta-based Intercept Inc., which has about 5,000 bank customers.
According to Lemoine, his firm and the other call report vendors will conduct beta tests of XBRL programs in 2003 to prepare for the FDIC’s program launch in 2004. He said that the FDIC, by that time, also hopes to have arrangements completed for a third party to operate the new repository for all the call report data. Electronic Data Systems now maintains the report information.
Bank operations will not necessarily feel any impact, because, the vendors said, banks will continue inputting financial data into the call report software in the normal manner. The change will be in the software itself, which will be reconfigured to output reports with XBRL tags.
"This should be completely transparent to banks and users," said Dan Bellerue, president of DBI Financial Systems, Santa Barbara, Calif. "It will be like telling them they will be filing on green paper rather than white paper."
One potential is bank reports with errors. Currently, the FDIC can detect and correct errors after the reports are sent; but the XBRL program would automatically kick back any reports with errors, such as formatting that does not meet FDIC specifics, said Tierney Dykes, an executive at Sheshunoff Information Systems, of Austin, Texas, the last of the three leading call-report vendors.
The call-report software executives each questioned speculation that the FDIC program will generate a cascading effect of increased market awareness of XBRL. They noted that banks, particularly their accounting operations, are largely unaware of XBRL.
"How pervasive XBRL gets really depends on how creative people get in using it, and that’s hard to say," said Bellerue.
