AnaCredit
Complementary cost-benefit assessment on the Integrated Reporting Framework - Closer alignment with FINREP solo
Complementary cost-benefit assessment on the Integrated Reporting Framework ?
- Complementary cost-benefit assessment on the Integrated Reporting Framework ?
Executive summary2
towards closer alignment of the two frameworks, rather than implementing all
changes at once. - Complementary cost-benefit assessment on the Integrated Reporting Framework ?
Executive summary3
1
Introduction
The complementary IReF cost-benefit assessment (CBA) followed an earlier
consultation on an initial CBA that was launched in 2020. - The report summarises the feedback received from the banking industry on the
possible closer alignment of the IReF with FINREP solo. - Complementary cost-benefit assessment on the Integrated Reporting Framework ?
Introduction4
2
General question on closer alignment
with FINREP solo
Closer alignment between the IReF and FINREP solo could allow more substantial
use of the IReF dataset for supervisory purposes, with the potential benefit of
reducing ad hoc requests to reporting agents due to a more analytical and stable
dataset. - The ECB legal framework for collecting FINREP solo information (Regulation (EU)
2015/34)4 currently sets up four different levels of reporting for proportionality
measures:
?FINREP data points;
?
over-simplified FINREP;
?
simplified FINREP;
?
full FINREP.
- Closer alignment does not mean that data
under the IReF will be collected from reporting agents at the level of the legal entity
in its entirety. - Complementary cost-benefit assessment on the Integrated Reporting Framework ? General
question on closer alignment with FINREP solo5
Chart 2.1
General assessment on closer alignment between the IReF and FINREP soloNotes: The percentages are calculated for each driver as the simple average of the corresponding frequencies across euro area
countries. - See Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of
the IReF Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results
are calculated. - Members also raised the point that IReF
information required for closer alignment with FINREP solo would only be collected
from institutions that are currently subject to FINREP solo reporting. - The open text comments that were received in the complementary CBA show that
different approaches to reporting at the level of the reporting agent may result in
different expectations regarding closer alignment. - There
were also several comments regarding the frequency and timeliness of the reporting
of attributes needed for closer alignment with FINREP. - Many comments questioned which accounting standards will underpin IReF
reporting, as those applicable to statistical reporting are often different from those
relating to FINREP solo reporting. - Complementary cost-benefit assessment on the Integrated Reporting Framework ? General
question on closer alignment with FINREP solo7
3
Extensions related to concepts already
available in the IReF baseline scenario
The IReF baseline scenario includes several accounting concepts that only apply to
specific financial instruments. - See
Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of the IReF
Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results are
calculated. - See
Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of the IReF
Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results are
calculated. - See
Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of the IReF
Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results are
calculated. - See
Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of the IReF
Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results are
calculated. - See
Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of the IReF
Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results are
calculated. - See
Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of the IReF
Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results are
calculated. - See
Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of the IReF
Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results are
calculated. - See
Annex B of the report ?Complementary cost-benefit assessment of the Integrated Reporting Framework ? Extension of the IReF
Regulation to cover country-specific requirements? published on the ECB?s website for information on how national results are
calculated. - Complementary cost-benefit assessment on the Integrated Reporting Framework ? Annex A
Results by type and size of respondent57
? European Central Bank, 2024
Postal address
Telephone
Website60640 Frankfurt am Main, Germany
+49 69 1344 0
www.ecb.europa.euAll rights reserved.
The Eurosystem Integrated Reporting Framework ‒ an overview
The Eurosystem Integrated
- The Eurosystem Integrated
Reporting Framework ? an overview
1Background
European Union (EU) banks face a whole range of data reporting obligations,
including for statistical, resolution and prudential information. - Existing ECB statistical regulations specify the information that must be reported, but
not how the actual reporting process is to be carried out. - The Eurosystem Integrated Reporting Framework ? an overview
1
submitted by reporting agents to NCBs.
- This arrangement dates back to when the ECB was set up in 1998 and was justified
at the time, as it meant that statistical reporting could be founded on well-established
national reporting frameworks. - Figure 1
Current Eurosystem approach to collecting statistical information from banksBanks
NCBs
ECB
Transformations by banks
Transformations by NCBs
Country ABSI & MIR
Integrated approach
?SHS
Country B
Operational
systemsMonetary data
b.o.p., i.i.p &
sector accountsCredit register
Sector accountsAnaCredit
b.o.p. - Under the new paradigm, cross-border banks could unify the
technical specifications of their reporting for all their European entities. - 2
The scope of the IReF
The IReF seeks to integrate existing ESCB statistical data requirements for banks as
far as possible into a single, standardised reporting framework applicable across the
euro area. - The feasibility of aligning the IReF
more closely with the Financial Reporting (FINREP) requirements applicable at solo
level11 is also being assessed. - Some NCBs have
developed an integrated reporting framework for investment funds (covering both
MMFs and non-MMFs). - The Eurosystem reviewed the results of the CBA to identify optimal features for
banks, the Eurosystem and its users. - This time frame will give reporting agents and the Eurosystem enough lead time to
prepare the legal and technical framework without unduly delaying the expected
reduction in the reporting burden. - 16
See ?On a Feasibility Study of an Integrated Reporting System under Article 430c CRR?, EBA, 2021;
and ?The EBA?s feasibility study on integrated reporting system provides a long-term vision for
increasing efficiencies and reducing reporting costs?, EBA, December 2021. - The Eurosystem is already cooperating closely with the banking industry to optimise
reporting and reduce the overall reporting burden via the Banks? Integrated Reporting
Dictionary (BIRD).19 BIRD offers a redundancy-free source (i.e. - The IReF describes statistical requirements in a redundancy-free layer
and will represent future statistical reporting obligations issued by the ECB and
applicable to Eurosystem banks. - Data quality should increase and costs decrease, as the BIRD input layer would
provide a comprehensive and flexible tool to support data reporting.
As interest rates surge: flighty deposits and lending
Philip R. Lane: The banking channel of monetary policy
for rates, credit growth in deviation from the start of the cycle (t) in p.p.
- for rates, credit growth in deviation from the start of the cycle (t) in p.p.
- Starting months correspond to the month immediately preceding the first hike or explicit announcement of the hike of the cycle.
- The dotted lines shows counterfactuals for lending rates and lending volumes, taking December 2021 as the last observation and
projecting volumes conditional on the path of monetary policy rates. - The one for lending volumes is based on the BVAR model in Altavilla,
Giannone, and Lenza (2016). - Composite funding costs are a weighted average of deposit rates
and average monthly bond yields, with outstanding amounts as weights. - Right chart shows
the contributions of the components to the change in the composite bank funding cost
between December 2021 and November 2023. - Latest observations: 8 February 2024 for bond yields; December 2023 for other series.
- Notes: ?Others? include shares (listed and not listed as well as those issued by investment
funds), and insurance and pension schemes. - Retail
Specialised
Universal
10
10
8
8
6
6
4
4
2
2
0
0
-2
-2
-4
Jan-20 Aug-20 Mar-21 Oct-21 May-22 Dec-22 Jul-23-4
Sources: ECB (iBSI, iMIR) MPC Task Force on Banking Analysis and ECB calculations.
- Investment refers to the net
change in property plant and equipment over assets; cash refers to cash and cash
equivalents over assets. - Households
loans, credit standards and loan demand
Rubric
Changes in credit standards for
loans to households, and
contributing factors
(net percentage)0
30
-40
20
Sources: ECB (BSI) and ECB calculations.
- Low-income households are those in the bottom 20 per cent
of the income distribution; high-income households are those in the top 20 per cent.
What drives banks’ credit standards? An analysis based on a large bank-firm panel
An analysis based on a large
- An analysis based on a large
bank-firm panelNo 2902
Disclaimer: This paper should not be reported as representing the views of the European Central Bank
(ECB). - We find
that weaker capitalised banks adjust their credit standards more than healthier banks, especially for
firms with a higher default risk. - Here we find t hat w eaker b anks r espond m ore f orcefully by
tightening their credit standards more than better capitalised banks. - On the contrary, weaker banks
may be more prone to adopt looser credit standards, with the aim of increasing their revenues. - To answer these questions, we analyse the determinants of banks? credit standards, i.e., their internal
guidelines or loan approval criteria applied when deciding on granting credit. - 2 Altavilla
ECB Working Paper Series No 2902
2
area banks tighten their credit standards more when linked to riskier firms, measured via firms? leverage
and default risk. - We assess how euro area banks adjusted their credit standards in response to
the negative COVID-19 pandemic shock, after accounting for government support measures. - When deciding on their credit standards, banks assess risks
based on both their own loss absorption capacity and the credit risk of their borrowers. - On the contrary,
weaker banks may be more prone to adopt looser credit standards, with the aim of increasing their
revenues. - We provide evidence that
euro area banks tighten their credit standards more when linked to riskier firms, measured via firms?
leverage and default risk based on the Altman Z-score. - In
addition, they focus on a different research question and use data from the IBLS only as a control. - ECB Working Paper Series No 2902
5
capital position implies less tightening of lending criteria, possibly reflecting the fact that banks can
afford to adjust their credit standards more moderately. - Based on our results, this implies a stronger deterioration of their lending conditions compared
with less vulnerable firms. - We assess how euro area banks adjusted their credit standards in response to
the negative COVID-19 pandemic shock, after accounting for government support measures. - This is in line with the role of government support
measures such as loan guarantees mitigating banks? exposure to firms? credit risks as they shield banks
from firms? increased credit risks. - 2
Related literature
Our paper is closely related to studies analysing credit supply based on BLS indicators and the impact
of monetary policy shocks on bank lending conditions in the euro area. - Hempell and Kok (2010) disentangle
pure loan supply based on the BLS factors and investigate the role played by such factors for loan growth. - Several other studies link confidential individual BLS data with actual bank-level data, but not firm
data, allowing an analysis of bank characteristics relevant for bank lending conditions. - They find that a short-term interest rate shock decreases both loan supply
and demand, but more for less healthy banks. - Their findings are consistent with the results of our paper on the favourable impact of bank health on lending standards.
- Both papers tend to find no evidence of higher risk taking of banks as a result
of accommodative monetary policy. - More recent studies are based on
confidential bank and firm-level data from national credit registers. - (2012) who focus on the bank-firm-relationship in Spain, based on credit register data.
- Ferrero, Nobili, and Sene (2019) arrive at a corresponding conclusion on the risk-taking
channel based on a confidential loan-level dataset of Italian banks. - In another paper, Altavilla, Boucinha, and Bouscasse (2022)
disentangle credit demand and supply based on euro area credit register data (AnaCredit) for the period
of the pandemic. - Our results emphasise the
mitigating impact of government guarantees on a tightening of credit standards during the pandemic. - This mitigating impact played a major role in loan demand and not credit supply being decisive for lending volumes during the pandemic.
- Based on their model, accommodative monetary policy is part of the optimal policy mix, combined with social insurance.
- To keep the wealth of information
available in the BLS, we run our analysis at the quarterly frequency of the survey. - of employees
101.4
2456.9
2.0
4.0
12.0
37.0
116.0
14944589
Panel (a): Banks
Credit standardsLoan loss provisions
Panel (b): FirmsNotes: Descriptive statistics for the bank-firm sample included in the regression analysis.
- Specifically, a one
standard deviation increase in the CET1 ratio leads to 0.2 standard deviations lower credit standards,
i.e., easier credit standards. - In their lending decisions, banks assess risks based on both their own
loss absorption capacity and the credit risk of their borrowers. - ?Credit supply and monetary policy: Identifying the bank balance-sheet channel with loan applications.? American Economic
Review 102 (5):2301?2326. - ?Hazardous times for monetary policy: What do twenty-three million bank loans say
about the effects of monetary policy on credit risk-taking?? Econometrica 82 (2):463?505. - ?The credit cycle and the business cycle: new findings using
the loan officer opinion survey.? Journal of Money, Credit and Banking 38 (6):1575?1597. - guarantees: proxy from BLS, bank level
0
.1
.2
.3
.4
Government guarantees exposure
-.5
-.25
0
.25
.5
Government guarantees exposure
Notes: Based on results from columns (3) and (6) of Table 4.
AnaCredit Validation Checks – Version 1.8
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