Adopting XBRL in 2005 gave the FDIC many benefits in their effort to supervise. So how did all those sub-prime mortgages make it under the radar?

In response to my posting "MissionKit 2009 supports XBRL, HL7," I heard from another company in the thick of the XBRL software market, UBMatrix. I spoke with Steve Levine, CMO, and Darren Peterson VP of product management; I also heard a lot about Charles Hoffman, the Director of Industry Solutions, Financial Reporting, who is sometimes called the "Father of XBRL."

XBRL is actually eight years old, and the XBRL market is driven by the collectors of financial information, such as the U.S. FDIC and the Dutch government. (UBMatrix has a whole section of its site that explains XBRL.)

The FDIC collects quarterly financial Call Reports from the over 5,000 FDIC-insured banks and needs to check the validity of the reports. Adding the FDIC banks together with those that report to two other agencies, more than 8,000 banks in total file Call Reports. Before XBRL was applied to the Call Report process in 2005, the "data collection and validation process was cumbersome and time-consuming." Adopting XBRL gave the FDIC many benefits, according to Martin J. Gruenberg, FDIC Vice Chairman:

l          95 percent of banks' original filings are clean, compared to only 66 percent under the old system; 

l          100 percent of data received are meeting mathematical requirements compared to 70 percent under the old system; 

l          Data receipt begins less than one day after the calendar quarter-end, compared to weeks of delay under the old system; 

l          Publication of the Quarterly Banking Profile, our flagship Call Report summary publication, occurs as much as three weeks earlier than before; 

l          Agency analyst productivity has improved 10 to 33 percent; 

l          We gain access to data sooner -- improving publishing speed and the ability to analyze data for supervisory purposes; and 

l          Regulator and bank use of consistent XBRL taxonomies allows real-time correction capability.

According to UBMatrix, XBRL data validation is done in a pyramid that starts with syntax checking and works upwards through taxonomy checking and XBRL formulas. XBRL formulas can compute financial ratios, check them against business rules, and perform statistical analysis. The FDIC, for example, uses thousands of business rules to flag problem areas.

That sounds idyllic. If you are like me, however, you are now wondering why the FDIC, using the Call Reports, didn't catch all those non-performing sub-prime loans that have wrought such havoc on the economy of late. I don't think I have ever heard a satisfactory answer. Perhaps it is because financial institutions outside of banking did not have to file Call Reports, but I still don't understand how the original mortgages stayed under the radar. Could it be that it took too long to decide that the mortgages were non-performing? Or that the original lenders just lied?

Changing the subject quickly, I found it interesting that Charlie Hoffman has been working on a simplified form of XBRL, in response to the difficulty of understanding the full XBRL specification. Extensible Business Reporting Language -- Simple, or XBRLS, "greatly improves the usability of XBRL and enables the non-technical business user to create XBRL reports in a simple and convenient manner -- without the need for expensive consultants and years of training." Basically, Charlie and others have identified common data patterns, meta patterns, and best practices, and come up with a form of XBRL that most accountants can understand with only a little training.

And by the way, UBMatrix has a full line of XBRL products, training, and regulatory solutions. Those are covered in detail that only an accountant could love on UBMatrix's Web site.