Together, the European Economic Area (EEA) and the European Banking Authority (EBA) wanted to ensure better financial transparency and harmonize European banks and investment companies. They introduced the Capital Requirements Directive IV (CRD IV) which came into effect January 1st 2014. The regulation requires two reports: Common Reporting (COREP) and Financial Reporting (FINREP).
COREP’s goal is to increase transparency in regulatory reports and standardize requirements for capital and risk. It does this by requiring reporting entities to disclose granular data, especially in terms of credit risk, market risk, operational risk, own funds and capital adequacy ratios. According to PWC, COREP impacts members of the European banking industry in four areas:
- COREP standardizes reporting requirements across Europe: prior to its implementation, there were multiple reporting requirements from different supervising authorities
- A central repository for banking data: a central repository promises to improve the understanding, management and identification of risk for entities that cross borders
- Enable analysis: by standardising information, it is easier to predict trends, conduct peer reviews, analyze risk and see an apples to apples view of banking institutions
- Data sharing: a templated version of data requirements from a central repository allows more effective sharing with authorities, supervisory colleges, ESRB and ESAs
COREP requires banking firms to contend with a series of templates, data requirements, data granularity, XBRL and submission deadlines. The regulation requires all credit and investment firms operating in the EEA to submit COREP reports to the National Supervisory Authority on a monthly and quarterly basis. They must submit five reports:
- Group Solvency/Large Exposures
- Market Risk
- Capital Adequacy
- Credit Risk
- Operational Risk