It’s exciting to see how quickly even large companies move when a potential solution is in sight and the motivation is strong. The IBM Data Governance Council is calling for the creation of an XBRL “risk taxonomy” – by year’s end – for the reporting and assessing of risk by financial firms.The Council, which includes C-level participants from some of the world’s largest financial institutions, was formed to help provide the business and financial world with consistent tools for measuring aggregate risk, and for getting get a real-time view of market exposure. It’s a mission made more urgent by the current economic crisis, and last month’s meeting to discuss the potential for XBRL was, according to IBM’s Steven Alder, “the most interesting and significant meeting” he has hosted in the past five years.
The morning discussions moved back and forth between economic interpretations, technological implementation, and banking operations. It was clear to everyone, said Alder, “that the sharing of normalized data via common interfaces could provide regulatory authorities with new insights on systemic risk.” In the afternoon, XBRL was the topic, and what might have happened if Lehman Brothers data had been reported in this data format: “XBRL metadata tags would have identified the relevant information to computerized analytical tools, and the financial institutions could have summarized their exact exposure at the press of a button.”
Adler chairs the IBM Data Governance Council and writes about the exciting two-day meeting in a blog post titled Smart Financial Regulation because that is what the group believes can be done, and soon. Smart Financial Regluation reguires 1) a new reporting structure (XBRL taxonomy) that precisely describes financial products and 2) new regulatory reporting rules preventing the trading of financial products unless they are defined using this new taxonomic vocabulary.
Alder says he intends to host regular meetings among principal representatives of these groups to develop the new reporting standards that enable Smart Financial Regulation. Stand by for more news soon on the Council’s progress.
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