Risk data aggregation strategies: an assessment guide
Effectively measure BCBS #239 compliance
Banks should develop an assessment framework to measure the effectivity of their implementation of the BCBS #239 principles for risk data aggregation and risk reporting
Banks need to comply with the 14 BCBS #239 principles
The Bank of International Settlements (BIS) recently published their third progress report of banks regarding the progress of the implementation of the BCBS #239 principles, also called the Principles for Effective Risk Data Aggregation and Risk Reporting (PERDARR). The most prominent goal of the BCBS #239 principles is to improve the quality of risk reporting and decision-making. This is realized by improving the processes regarding data gathering, data aggregation and calculation of risk data of banks. With BCBS #239, the Basel Committee addresses existing gaps in risk data aggregation and reporting. It introduces 14 principles with which banks must comply within three years of being designated as a global or domestic SIB.
The regulators have set the deadline that global systematically important banks have to comply with the BCBS #239 principles on 1 January 2016. For the Dutch market this applies to ING bank. For the other Dutch domestic systemically important banks the regulator has extended the deadline. Based on the progress report of BIS however, banks expect to be fully compliant with all principles ranging from early 2016 up till 2018.
The required transformation within timelines is a big challenge
History shows that BCBS #239 is clearly required to improve quality of risk reporting. However, BIS recognizes in their progress update that implementation of the risk data aggregation principles within timelines is challenging:
- BCBS #239 is principle-based, as a consequence an objective assessment framework is missing. Banks should make this translation themselves, based on their business model and risk profile
- Banks are undertaking large IT infrastructural change programs within the finance and risk domain, which will significantly contribute to BCBS #239 compliance. These programs are typically multi-year and multi-million and deadlines are often beyond the compliance deadlines
- Further automation of front- and back-office processes is required for accurate, timely and complete risk reports. This will significantly contribute to the ability of banks to produce ad hoc reports, required for crisis and stress situations
- Data quality of source data should be improved to improve regulatory reporting and internal decision making
How to make sure you have the right focus?
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
Deloitte: your partner to implement BCBS #239
We understand the challenges you have and we are involved in several Dutch and international BCBS #239 implementation initiatives. Crucial questions like “does this project contribute to BCBS #239 compliance” or “are we doing the right thing to become BCBS #239 compliant” are business as usual. Changes to the IT infrastructure are challenging given both the risk data aggregation principles and the complexity and granularity of regulatory reporting.
We support our clients to make the required transformation in the area of data management, IT and policy in order to become BCBS #239 compliant.
We also help banks to implement data governance, make data quality transparent and implement the required improvement processes. As such we assist our clients to set a visible and important step to improve risk reports and BCBS #239 compliance.
More information on BCBS 239?
Do you want to know more on BCBS 239? Please contact Geert Waardenburg at +31 (0)88 288 3246.