The Framework for Consolidated Financial Reporting (FINREP) : an evaluation and its applicability for credit institutions in Malta

Abstract

The need for reassessing and harmonising reporting requirements for credit institutions in the EU has promoted the initiative for the development of the Framework for Consolidated Financial Reporting (FINREP) by the Committee of European Banking Supervisors (CEBS). This requirement is further strengthened in view of the diverse practices being applied by European regulatory authorities in extrapolating financial data for prudential purposes, together with the obligation for listed companies to prepare their consolidated financial statements on the basis of International Financial Reporting Standards (IFRS/IAS). As a result, this guideline is an attempt to provide a standardised reporting format. It is expected to reduce the reporting burden for credit institutions and to contribute towards improving the cost effectiveness of supervision across the EU. Banking supervisors have an interest in adopting an accounting framework that provides a reliable, comparable and unequivocal financial framework. The qualitative criteria contained in the accounting standards developed by the IASB are intended to provide financial information that is reliable, relevant and verifiable. Issues of materiality, neutrality, prudence and the exercise of judgement are given due importance. Statistical reports are essential to monitor the impact of events. However, clarifications and explanations would still have to be sought during on-site and off-site inspections. It is through the combination of these measures that an adequate opinion may be formulated. Moreover, due diligence has to be applied as to the proprietary and extent of relevance the information contained in FINREP may provide. The sensitivity of data that may be required for disclosure may have a considerable impact on the market and on the individual credit institution.