Better Numbers: An Update on DPM 2.0
The data collection systems and processes at the European Banking Authority (EBA) and European Insurance and Occupational Pensions Authority (EIOPA) are currently undergoing a major overhaul to enhance their efficiency and effectiveness. In this interview, XBRL International discusses the Data Point Model Refit and related developments directly with the EBA. Read on for vital updates, in-depth insights, and a look into the future.
Q1: The European Banking Authority (EBA), together with the European Insurance and Occupational Pensions Authority (EIOPA), has been working towards a new set of tools and methodologies, called the Data Point Model Refit. Can you outline your goals for the project, the timelines and the current status of this initiative from the EBA’s perspective?
A1: The Data Point Model (DPM) Refit is a collaborative effort between the EBA and EIOPA, primarily aimed at reviewing the DPM metamodel, which has served as the foundational framework for defining regulatory data requirements over the past decade.
Common goals of the DPM Refit include:
- Enhancing flexibility: our primary goal is to make the DPM more adaptable, ensuring it can evolve alongside the changing needs of regulators and reporting entities.
- Harmonising reporting: we aim to promote consistency in regulatory reporting across the diverse sectors of the EU financial landscape, aligning and simplifying practices.
- Improving efficiency: our intention is to improve all processes within the extensive reporting lifecycle that rely on the DPM data dictionary. This includes increasing the potential for automation and improving the report preparation processes on the reporting entities’ side.
EBA timelines for the DPM Refit include:
- 2023: this year was dedicated to finalising the DPM 2.0 standard and developing essential tools and methodologies to support its adoption.
- 2024: in 2024, we plan to pilot the implementation of DPM 2.0 within specific reporting frameworks, followed by full-scale implementation across the entire EBA Reporting Framework v4.0.
- 2025: the transition to DPM 2.0 continues in 2025, maintaining parallel publication with the older format.
- 2026: starting in December 2025, DPM publications will adhere exclusively to the DPM 2.0 standard.
- We have already finalised and published the DPM 2.0 metamodel.
- The development of DPM Studio tools, supporting the creation of frameworks under the DPM 2.0 standard, is in progress. The initial minimal viable product (MVP) release is expected by year-end.
- We are about to start a pilot implementation of DPM 2.0 in select reporting frameworks. This will mark a significant milestone.
The EBA is fully committed to the success of the DPM Refit initiative and has actively communicated with stakeholders, including reporting entities, software vendors, and regulators, keeping them updated via seminars and workshops. This initiative, combined with concurrent enhancements to the XBRL standard, has the potential to decisively streamline supervisory reporting in the EU, alleviating the reporting burden and enhancing data quality and comparability, ultimately strengthening the performance of the supervisory framework.
Q2: The EBA has reaffirmed its focus on open and widely used international standards. Can you tell us what this means in practice?
A2: It is important to emphasise that the DPM Refit project primarily revolves around enhancing the DPM metamodel. This metamodel serves as the foundational structure for defining reporting requirements and has been a core element of our regulatory reporting framework for the past decade.
The central goal of the DPM Refit project is to modernise and optimise the existing DPM metamodel, which has, till now, seen minimal changes since its inception. This project seeks to address challenges related to regulatory reporting while streamlining and optimising our internal processes. It’s important to note that this project does not impact the data exchange format used for regulatory reporting.
The EBA underscores its dedication to maintaining eXtensible Business Reporting Language (XBRL) as a fundamental component of our regulatory reporting framework. We have actively collaborated with the XBRL community to address various challenges associated with XBRL-based reporting. Initiatives like the Task Force for the Evolution of the Reporting Format (TFERF) have been launched to address issues such as the verbosity of XBRL data exchange format and complex validation rules.
The transition from the xBRL-XML reporting format to xBRL-CSV is currently in progress, with the EBA aiming to complete this transition by the end of 2025. We highly value the contribution of the XBRL community in this process, particularly in defining new standards for validation rules in the xBRL-CSV format, recognising its significance for stakeholders, especially reporting institutions that rely on reliable market solutions.
The EBA’s focus with the DPM Refit project is on optimising the DPM metamodel and improving the efficiency and effectiveness of regulatory reporting. We aim to streamline our internal processes while upholding our support to XBRL as an important element of regulatory reporting. We actively engage with the XBRL community to ensure a smooth transition to better reporting standards, addressing challenges without fundamentally altering our approach to regulatory reporting.
Q3: One key aspect of the new environment is that the EBA will require that National Competent Authorities (NCAs) and the European Central Bank (ECB) submit bank filings in the xBRL-CSV format to the EBA from the end of 2025. The xBRL-CSV format is much more compact than the xBRL-XML format that has been used for a number of years. Is that the main reason the DPM Refit has moved in this direction, or are there other reasons?
A3: In June 2019, at the Eurofiling conference in Frankfurt, the EBA communicated the need to evolve the regulatory reporting standards, setting the stage for two critical initiatives. It’s essential to revisit the context of these initiatives to understand the reasons behind the move to the xBRL-CSV format.
The Need for DPM Evolution: it was clear at that time that the DPM metamodel and methodology needed to evolve. The DPM database, created in 2012 to support the development of the EBA reporting framework, had been accumulating all framework versions over six years, but its structure had remained largely unchanged since its first publication. Meanwhile, this database served as a cornerstone in the EBA’s reporting infrastructure and was vital for the processing and analysis of regulatory data.
Furthermore, the substantial evolution of reporting requirements while utilising the DPM revealed specific limitations, including issues related to modelling open tables, versioning domains, dimensions, and hierarchies, along with the requirement for enhanced validation rules and calculations.
To address these issues, the EBA embarked on the DPM Refit project, with the primary objective of enhancing the DPM metamodel, making it more adaptable, efficient, and effective in meeting the ever-changing regulatory landscape.
The Need for Data Exchange Evolution: in parallel, the EBA recognised critical issues with the data exchange format used for regulatory reporting. The xBRL-XML format in use had seen little change since it started being used in 2014, resulting in very large report files that were less efficient or sometimes impossible to process.
These large XBRL files pose several challenges. The process of parsing, validating, and integrating data from these files consumes excessive time and computational resources, making it inefficient for all parties involved. Given the evolving landscape of regulatory reporting, which is moving towards more granular data and anticipating larger volumes of data in the future, it became evident that the data exchange format needed to be more streamlined and efficient.
To tackle these challenges, the EBA launched a proactive initiative aimed at analysing and engaging in discussions with various stakeholders to simplify and enhance the current data exchange specifications. This effort included the establishment of the Task Force for the Evolution of the Reporting Format (TFERF), a collaborative endeavour involving Competent Authorities, the EBA, and EIOPA, with crucial contributions from representatives of Eurofiling and XBRL International. The overarching goal was to ensure that this evolution aligned with XBRL standards, thus protecting existing investments in reporting solutions and tools, while mitigating any disruptive effects of potential changes.
The TFERF, specifically established to address data exchange format and electronic reporting issues, prioritised various concerns, including the verbosity of the XBRL data exchange format, complex validation rules, and the challenge of efficiently handling large report files. Additionally, the intricate architecture of the XBRL taxonomy, which presented non-versioned views of the reporting data dictionary, remained a hurdle. In response, the TFERF achieved significant progress, notably in 2020 when it proposed adopting the xBRL-CSV reporting format as an alternative to the traditional xBRL-XML format. This new format, proposed by XBRL International and further refined by the TFERF, was considered a more efficient solution for regulatory reporting.
Moreover, in 2022, the TFERF reactivated its efforts to address the complexity and performance issues related to XBRL validation rules. The conclusion was that new technical specifications for the validation of xBRL-CSV reports were needed. These specifications should be developed under the coordination of XBRL International, which had been working on a new proposal for this purpose.
In summary, while the DPM Refit initiative primarily concerns the enhancement of the DPM metamodel, the EBA recognised the importance of addressing issues related to the data exchange format as a parallel initiative. The move towards the more compact and streamlined xBRL-CSV format is a result of these efforts to improve the effectiveness and overall performance of data exchange in regulatory reporting, while maintaining compatibility with XBRL standards.
Q4: The DPM Refit incorporates an authoring, testing and processing environment for business rules, or data quality rules for use by the EBA. In our understanding, the EBA’s systems are oriented towards internal processing and will continue to produce XBRL taxonomies including XBRL Formula Rules that define the reporting requirements that are needed by standards-compliant processing software to create reports. What, impact, if any, in practice, does the DPM Refit mean for regulated banks and for software vendors that support those regulated banks?
A4: The DPM Refit project encompasses various improvements to the metamodel, including two pivotal aspects related to business rules:
DPM-XL Language Review: a crucial component of the DPM Refit initiative involved conducting a comprehensive review of the DPM-XL language, which is used for defining validation rule This review builds upon the language’s foundation established in 2013 and introduces refinements to enhance its formality and reduce ambiguity, with the primary goal of making the language more amenable to automation. This, in turn, streamlines the validation process within the regulatory reporting framework, significantly improving the clarity and automation capabilities of validation rules. These enhancements align with the project’s objectives of achieving greater efficiency and precision.
DPM Metamodel for Operations: in DPM 2.0, the operations metamodel has undergone a comprehensive redesign with a primary focus on supporting the definition and maintenance of business rules. This metamodel, which stores all historical metadata related to business rules, also serves two additional roles.:
- Supporting the Calculation and Validation Engine (CVE): this redesigned metamodel provides essential inputs for the CVE, a vital component of the EUCLID system developed by the EBA. The CVE enforces official validation rules, enhancing the accuracy and reliability of regulatory reporting, both within and across reporting instances. Being primarily intended for EBA’s internal use, the CVE doesn’t have direct implications for regulated banks and the software vendors that support them.
- Automated Generation of XBRL Formula Rules: the DPM Operations metamodel also plays a core role in generating XBRL Formula Rules automatically in compliance with established standards. This process ensures the provision of consistent reporting specifications and the preservation of standard adherence. It remains unchanged for external stakeholders who rely on XBRL technology for quality checks, maintaining their confidence in its effectiveness and reliability.
In essence, the DPM Refit project includes these two crucial aspects related to validations: the DPM-XL language review and the DPM metamodel for operations. These enhancements strengthen the regulatory reporting framework, promoting efficiency, precision, reliability, and opening the door to further automation, without forcing any change to the processes and solutions already in place on the regulated banks side.
Q5: Banks’ filings go to their NCA. What are the respective roles of the NCAs, the ECB and the EBA in terms of applying data quality rules and providing feedback, and in terms of determining when an institution has fulfilled its reporting obligations?
A5. The various stakeholders engaged in the reporting process share a collective responsibility for ensuring the quality of reporting, each playing a distinct role. These stakeholders encompass:
- Reporting Institutions: at the forefront of data submission, reporting institutions bear the primary responsibility for upholding the integrity of their data. They must adhere to data quality standards, establish robust internal data governance, submit reports punctually, and cooperate with the relevant authorities. They form the initial and most important line of defence in assuring the quality of reporting.
- NCAs: NCAs play a key role in verifying the quality of data supplied by reporting institutions within their respective jurisdictions. To achieve this, NCAs employ data quality criteria and validation rules outlined by the EBA, assessing data accuracy, precision, and consistency. Additionally, NCAs provide feedback to reporting institutions on data quality concerns and may request revisions and clarifications to ensure compliance with regulatory standards. Beyond this, NCAs determine whether reporting institutions have met their reporting obligations by assessing the quality and comprehensiveness of the data.
- ECB: serving as a central coordinating authority, the ECB collaborates closely with NCAs to establish unified data quality checks and standards across institutions operating in the euro area. While their role is more concentrated on a broader scale of data quality, the ECB is instrumental in promoting consistency and adherence to common data quality rules across institutions.
- EBA: The EBA, working together with the NCAs, is responsible for shaping and standardising data quality rules, validation criteria, and reporting requirements for regulatory reporting. It lays out the framework and guidelines that NCAs and reporting institutions must follow to preserve the quality of their reports. Moreover, the EBA may extend guidance and support to NCAs in applying data quality rules and validation criteria. As a central point of contact for data quality-related matters, the EBA also facilitates communication between NCAs and reporting institutions.
The collective responsibility of different stakeholders involved in the reporting process is to ensure the quality of reporting. Reporting institutions have the foremost responsibility for data quality compliance. NCAs, with the backing of the ECB and EBA, oversee data quality, provide feedback, and determine fulfilment. This cooperative approach is designed to uphold the integrity of the regulatory reporting framework and maintain the stability of the financial system.
Q6: Related to this, the new EBA “CVE” system is used for processing data once it arrives at the EBA. Does this system have relevance to commercial banks?
A6: The new CVE system, which stands for Calculation and Validation Engine, plays a specific role in the processing of data once it arrives at the EBA. However, its relevance to commercial banks largely depends on the type of reporting scenario and the approach followed:
- Sequential approach:
For standard supervisory and resolution reporting processes, where data flows in a sequential manner from banks to NCAs, and from NCAs to the EBA (or to the ECB and then to the EBA), the CVE system’s relevance to commercial banks is minimal. In these cases, banks primarily interact with NCAs as the intermediary step.Banks submit their reports to NCAs, which are responsible for conducting data quality checks and ensuring compliance with regulatory standards. NCAs play a significant role in validating and verifying the data provided by banks.The CVE system, which is used for automated data validation and calculation, is predominantly employed by the EBA. Banks typically do not directly engage with the CVE in this reporting framework.The focus for banks in this context is on accurately preparing and submitting their reports to NCAs within the stipulated deadlines and in compliance with the reporting requirements.
- Direct reporting:
In situations where banks would report directly to the EBA without an intermediary NCA (e.g. for the upcoming Pillar 3 data hub), the relevance of the CVE system becomes more pronounced for commercial banks.The CVE system is utilised by the EBA to automatically process and validate the data submitted by banks. It runs validation rules and checks to ensure data quality and consistency.Banks that report directly to the EBA will receive automatic feedback from the CVE based on the results of the validation rules run by the engine. This feedback is valuable for banks to identify and address any data quality issues or errors.In these cases, the CVE system becomes an integral part of the reporting process for banks, as it directly influences the validation and feedback they receive from the EBA.
Ultimately, the relevance of the CVE system to commercial banks varies depending on the reporting approach. For standard supervisory and resolution reporting with a sequential data flow through NCAs, the CVE’s significance to banks is limited. However, in cases where banks report directly to the EBA, the CVE system becomes a valuable tool, providing automated data validation and feedback, which contributes to the overall quality and accuracy of regulatory reporting for commercial banks.
Q7: Is there anything else that you would like to share with our readers?
A7: The EBA remains steadfast in its commitment to enhancing the quality, efficiency, and simplicity of regulatory reporting. This ongoing commitment is central to its mission of ensuring the highest standards in financial data reporting.
Through these efforts, the EBA aims to achieve several key objectives:
- Quality Assurance: the EBA’s focus on the quality of reporting remains unwavering. By refining data quality rules and validation criteria, the EBA contributes to the production of accurate, consistent, and reliable financial data.
- Enhanced Efficiency: automation tools like the CVE streamline data processing, resulting in more efficient reporting processes. This not only saves time but also improves the overall quality of reported data.
- Standardisation: the EBA’s role in standardising reporting rules ensures consistency and uniformity in regulatory reporting. This benefits both reporting institutions and regulatory authorities, promoting a shared understanding of requirements.
- Reducing the Reporting Burden: simplified reporting processes and improved data quality lead to a reduced reporting burden for all parties involved. Reporting institutions benefit from clearer guidelines, NCAs can more effectively verify data, and the financial industry as a whole enjoys more robust and reliable information.
Furthermore, the ECB is considering the implementation of DPM 2.0 in their Integrated Reporting Framework (IReF). This integration represents a significant expansion of the DPM, which will now encompass Supervisory, Resolution, and Statistical reporting. This extension fulfils the foundational goal of syntactic integration, paving the way for a common data dictionary shared across reporting frameworks and achieving the ultimate aim of full semantic integration. This common data dictionary is a key enabler of future Integrated Reporting for the Banking Sector (IRB), streamlining compliance and enhancing data quality and consistency.
In conclusion, the EBA’s unwavering commitment to continuous improvement not only supports regulatory compliance but also fosters an ecosystem where high-quality data reporting is less burdensome and more beneficial for all stakeholders. This commitment reflects the EBA’s dedication to financial stability, integrity, and the well-being of the industry and the broader economy. The evolution of the DPM into the ECB’s IReF represents a promising future where reporting processes become more streamlined, efficient, and of the highest quality, reducing the burden on all parties involved and contributing to the overall success of the financial industry.