A Countdown to Risk Data Aggregation Readiness

At a recent risk conference, a prominent regulator stated that only a third of the Global Systemically Important Financial Institutions (or SIFI’s as they are known) were well on their way to complying with the new regulation on risk data aggregation and reporting.  Furthermore, he indicated that another third of these banks thought that they were making progress with compliance, but the regulator had a different opinion - the remaining third were struggling to make headway with the new regulation.  Come January 1, 2016, these ~30 banks must comply with this new regulation or face consequences ranging from “name and shame” to supervisory remediation of their IT practices.

This simple-sounding regulation known as BCBS 239 mandates that all Global SIFI’s automate their internal reporting processes, and that they are able to aggregate data across lines-of-business, legal entities, asset types, industries and regions.  In addition, the reports need to be timely, accurate, reconciled and complete.

At these large banks, IT complexity and silo’d platforms present major obstacles to BCBS compliance.  If your bank is a SIFI and is heavily reliant on spreadsheets to complete monthly book close or perform simple MIS queries, don’t be surprised if your bank is in the bottom two-thirds of the regulators' list.  Many large banks still have great difficulty in producing single views of their customers, so the ability to automate reporting as well as do ad hoc queries of concentrations may be even more elusive.

The challenge of pulling disparate, fragmented and silo’d data from a myriad of platforms is no easy task.  Rather it can be described as onerous and costly!  Banks taking the route of bringing their data together by integrating a network of source systems-of-record with their collection of data warehouses may find this approach difficult to implement and even tougher to maintain.  Instead, banks should view BCBS 239 compliance as an opportunity to standardize their risk, finance, treasury and management reporting all on a single, unified data foundation.  Benefits of this approach will enable consistent access to quality data that has been reconciled with the general ledger as well as a single source of truth across the bank.  Banks choosing this approach will not only be able to effectively respond to the requirements of BCBS 239, but also be able to effectively leverage this data across all risk models, applications, and stress testing frameworks for compliance with other regulatory requirements.

If your bank is not (or not yet) a SIFI, you may consider assessing any gaps in fulfilling the requirement.  Should your bank plan to grow via acquisitions or seek future regulatory approvals, your bank most likely will be held to higher standards.  This explains why compliance with the new regulation is gaining the attention of many other large, complex institutions as well.