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FSA/PN/050/2006
1 June 2006

The Financial Services Authority (FSA) has today issued a consultation paper on new Integrated Regulatory Reporting (IRR) requirements for firms. These will enable the FSA to use regulatory reporting to more effectively monitor and mitigate risks to the FSA's statutory objectives.

The requirements will apply to banks, building societies and investment firms. These include investment managers, securities and futures firms, operators and trustees of collective investment schemes, venture capital firms and corporate finance firms.

Graeme Ashley-Fenn, FSA Director, Contact, Revenue and Information Management, said:

"Regulatory reporting is a key FSA supervisory tool for identifying risk within the FSA's ARROW framework of risk based supervision. The proposals will align reporting for these industry sectors within that operating framework. Many existing requirements date back to our predecessor regulators and these will be brought up to date for the FSA's needs. Under the proposed changes, the FSA will cease collecting data it no longer needs and will fill gaps in its data collection.

"IRR will make the FSA easier for firms to do business with. Firms will benefit from the reduction of duplication through aligning IRR reporting dates with their financial year-ends. We will continue to engage with the industry during the consultation to ensure we end up with the right reporting requirements for all parties."

This consultation completes the FSA's commitment to review the type and quality of standardised information required from firms and to harmonise reporting formats. The Capital Requirements Directive (CRD) and Markets in Financial Instruments Directive (MiFID) will be implemented during 2007 and 2008. The FSA has used their introduction as an opportunity to review reporting requirements for the relevant firms. At the same time the FSA has revised its reporting requirements for firms in these sectors that are not affected by CRD or MiFID but where it needed to bring reporting in line with its risk based approach.

The FSA aims to give firms a minimum of 12 months' notice of changes to the reporting requirements. Where shorter notice is required due to the CRD and MiFID timetables, the consultation paper proposes interim arrangements for firms to submit key regulatory reporting data where this relates to Directive-driven changes. This information will be supplemented by allowing firms to continue to submit the existing returns on the 'old' basis during that period. Mandatory electronic reporting (MER) will only apply to the new data as it is phased in and the FSA's systems are developed. The FSA has set up a number of advisory groups made up of trade associations and firms to seek input on the development of the MER system.

Notes to editors

1. Consultation Paper 06/11 'Integrated Regulatory Reporting (IRR): Credit institutions and certain investment firms' can be found on the FSA website. The consultation periods are in stages ending 31 July 2006 and 31 August 2006.
2. CP06/11 includes feedback on Discussion Paper 05/1 'Integrated Regulatory Reporting (IRR) for: Deposit takers, principal position takers, and other investment firms subject to the Capital Requirements Directive' which was published in February 2005.
3. Amongst the key principles underlying IRR are:
   
   
   • activity-based reporting – firms carrying on similar activities will submit similar information. This will enable the FSA to monitor and mitigate risks posed by a particular activity regardless of whether it is undertaken by a bank, building society or an investment firm;
   • use of reporting to monitor a wider range of risks – the FSA will use reporting to monitor and mitigate risks to its objectives arising from the way firms conduct their business as well as those arising from prudential requirements; and
   • aligning IRR reporting periods with firms' own accounting year-ends.
4. Since 2003, under the IRR programme, the FSA has reviewed the reporting requirements for all regulated activities. In addition to those covered by this consultation it has developed reporting requirements for mortgage and general insurance business which were first regulated by the FSA in October 2004 and January 2005 respectively. At the same time the FSA revised the reporting for financial advisers and complaints reporting for all firms. The FSA has also revised the published annual financial return for insurers and certain friendly societies.
5. The FSA regulates the financial services industry and has four objectives under the Financial Services and Markets Act 2000: maintaining market confidence; promoting public understanding of the financial system; securing the appropriate degree of protection for consumers; and fighting financial crime.
6. The FSA aims to promote efficient, orderly and fair markets, help retail consumers achieve a fair deal and improve its business capability and effectiveness.