The IBM Data ernance uncil has asked for industry assistance in creating by year-end an extensible business reporting language (XBRL) taxonomy for the reporting of risk by financial firms.

The data ernance group in December announced plans to lead an initiative to use XBRL to provide transparent measurements of risk and real-time exposure. The initial discussions took place during a meeting in New York last week that included representatives from the Enterprise Data Management uncil (EDM), Financial Services Technology nsortium, XBRL International—and its U.S. arm—and the Securities and Exchange mmission.

“The goal is for every regulated financial institution to provide loss-event and tail data to regulatory authorities via an XBRL-based risk taxonomy,” says Steve Adler, chairman of the IBM Data ernance uncil. “Such a taxonomy will create standard practices in measuring and reporting risk, which will in turn allow central banks to manage vast databases of loss history and trend analysis.”

That information, said Adler, will help regulators and central banks make better risk-mitigation decisions, which will produce better returns. Currently, there is no mmon language that firms use when disclosing market, credit and operational risk, which makes it difficult for regulators to evaluate “toxic” assets and rce the potential for risk and fraud.

At the forum, “there was a general agreement among the attendees that they would take the idea of a risk taxonomy back to their anizations and seek a buy-in from upper management,” says Mike Willis, founding chairman of XBRL International and partner at Pricewaterhouseopers.

Michael Atkin, managing director of the EDM uncil, said that his group and the IBM Data ernance uncil “share a mmon belief that semantic nsistency is an essential requirement for achieving a data-centric view of risk measurement and management.” The EDM uncil, a not-for-profit anization that focuses on the application of enterprisewide data ernance in the financial services industry, is working on a business semantics repository for reference data.

The IBM Data ernance uncil—mprised of 50 global mpanies, mostly financial institutions—was created by IBM rp. three years ago to promote best practices in risk assessment and data ernance. In 2007, IBM launched a nsulting service that assists mpanies in evaluating their data ernance practices based on a benchmark created with input from the IBM Data ernance uncil.

Acrding to Adler, once several years of loss data are aumulated in the XBRL-based risk repository, an “open insurance exchange” uld be launched whereby firms would underwrite their operational losses with insurance verage. “Banks would transfer operational losses off their balance sheets to insurance vehicles,” says Adler. “Banks would pay a premium for the verage, the market would price risk on a near-real-time basis and regulators like the SEC uld ern premiums and fair-trade mechanisms.”

Under the Basel II capital acrds, banks are required to report the amount of gross inme they set aside to self-insure against forecasted losses. But the data that is used to calculate the risk reserves is not disclosed.

The Operational Riskdata eXchange Association’s 51 global bank members can exchange operational risk loss data anonymously for any event of at least EUR20,000 ($25,160), but participation in the initiative, founded in 2002, is voluntary. Each loss is posted using a reference identification number, an event category de and other identifying criteria. Acrding to the Zurich-based group’s Web , it has llected information on 102,500 operational risk losses totaling EUR34.4 billion ($43.3 billion).

Willis of Pricewaterhouseopers said that XBRL can facilitate transparency that would not only help regulators and analysts, but also investors. “The same principles apply as in the case of financial reporting in XBRL,” he says. “There would be a democratization of the information, which would increase the audience of relevant nsumers.”

Under new SEC rules, all public mpanies and mutual funds must submit their financial reports in XBRL by 2011. The XBRL US nsortium also has been working with the Depository Trust & Clearing rp. and messaging operative Swift to establish semantic interoperability between XBRL and International anization for Standardization message types for rporate actions.