A guide to assessing risk data aggregation strategies

Effectively measure BCBS 239 compliance

The principles-based regulations of BCBS 239 on risk means that to effectively measure their performance, banks must develop compliance metrics.

Systemically important banks (SIBs) face an aggressive timeline to comply with Basel Committee on Banking Supervision (BCBS) 239. Some are required to comply as early as January 2016. In addition, the regulation is based on principles and offers few clear metrics to measure compliance effectiveness.

As the 2008 financial crisis made clear, each bank must prioritize addressing gaps in its Risk Data Aggregation and Reporting (RDAR) capabilities. Without these capabilities, senior management is unable to obtain an accurate and in-depth picture of the risks the bank faces.

With BCBS 239, the Basel Committee addresses existing gaps in RDAR. It introduces 14 principles with which banks must comply within three years of being designated as a global or domestic SIB. These principles include “Completeness,” “Timeliness” and “Adaptability.”

Compliance won’t be easy

The goals of BCBS 239 are necessary and laudable, but compliance deadlines are tight and implementation entails a number of challenges. For example, many banks continue to lack the high-quality data capture and aggregation processes full compliance will require. Moreover, the regulatory requirements will exert further pressures on banks’ already strained reporting systems and resources. Most significant, however, is that banks must deal with a regulation that is principles-based and offers few clear metrics by which they can monitor and gauge the effectiveness of their compliance.

A guide to assessing your risk data aggregation strategies: How effectively are you complying with BCBS 239? provides focus areas for select principles in the regulation. It can help banks determine whether their compliance efforts are sufficient and what action to take if they’re not. It also offers considerations on how to develop metrics that accurately gauge compliance levels.

By applying the suggested approach and implementing the suggested metrics, banks can more effectively aggregate and report their risk data. This will help them meet all regulatory expectations in a changing and challenging compliance landscape.

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