The concrete impacts of BCBS principles on data value chains
The application of the BCBS 239 regulation will have a direct consequence on banks’ data management. Indeed, all of the principles exposed in the text aim to push banks towards risk evaluations based on optimized, documented and transparent data usage. Banks have to deal with several challenges that can be tackled without too much difficulty if they perform the right technological component selections and organizational designs.
In January 2013, the Basel Committee on Banking Supervision published the BCBS 239 paper: “Principles for effective risk data aggregation and risk reporting”.
The objective of this regulatory framework is to ensure that data used for risk calculation and, ultimately, the required capital definition, is of the appropriate level of quality. Furthermore, over time it will enable the decision-making process to be improved, and losses due to bad risk management to be reduced within all relevant banking institutions. This means that not complying with these principles would jeopardize the trust of regulators in the provisions made by banks, which could lead to capital add-on.
At this stage, G-SIBs and D-SIBs are affected by this regulation but within different timeframes (1 January for G-SIBs, three years after designation for D-SIBs). This way, G-SIBs and D-SIBs are at different stages of implementation but SIBs will have to prioritize and efficiently organize their project portfolios to meet deadlines.
The BCBS 239 principles represent an opportunity to improve data management and IT infrastructure. Making appropriate investment in information systems will generate enterprise-wide benefits, such as data quality, process optimization, and improvement of decision-making processes.
Inside magazine issue 10, October 2015
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