The Basel Committee on Banking Supervision’s principles for effective data aggregation and risk reporting as laid out in BCBS 239 provide a framework for best practice in the industry. Adherence to the BCBS 239 principles requires real change for an institution, its approach to data governance and how data is managed across a raft of legacy systems. Just producing regulatory reports is no longer a sufficient response, as BCBS 239 concentrates on the data and architecture underlying the reports produced, not just the reports themselves.
To satisfy the conditions of completeness and comprehensiveness, risk data from multiple silos needs to be integrated, presenting a challenge to often highly complex and diverse institutions. Large institutions formed by mergers could previously pass reports to the regulators through individual balance sheets; now a consolidated balance sheet view is required.
Having a clear understanding and map of data within the organisation, its processes and where manual touch points occur is the first step to implementing a robust platform for decision-making and reports. Further questions follow from this such as how the data is shared and if there are data quality metrics in place.
In addition, demands on IT architecture from the BCBS 239 principles relating to frequency and speed, especially in times of stress and crisis, mandate a framework that is scalable and robust.
A focus on data processes and data governance requires alignment across risk solos. The emphasis placed on data quality, accuracy, integrity and completeness need a system capable of providing consistent and identical data with all departments referencing the same cleansed, validated, quality data sets. On the reporting side, all data inputs to risk reports need to be traceable and auditable.
Along with validation, traceability and lineage features, in many instances what is required is more efficient use of data in general for the business with centrally stored and near real-time data available, allowing greater efficiency in calculations of capital and collateral. Again the focus falls on IT departments to provide solutions capable of managing the scope and volume of data needed to feed the reports.