It has been a decade since the Basel Committee on Banking Supervision issued standard number 239 (BCBS239), entitled "Principles for Effective Risk Data Aggregation and Risk Reporting" (RDARR or RDAR). BCBS239 was born out of the 2008 financial crisis, which illuminated our collective struggle with aggregating risk exposure and identifying risk concentration across products, customer segments, lines of business, and legal entities in a timely fashion. This timing issue is significant, as sound decision-making hinges on having accurate and current information. BCBS239 was created to guide banks toward better risk management through sound data practices.
Global Systemically Important Banks (G-SIBs) and Domestic Systemically Important Banks (D-SIBs) were given a three-year grace period in which to implement their RDAR practices. The thirty-six month clock started when BCBS239 was published, or from the point after that at which a bank was designated as either a G-SIB or a D-SIB. So, let’s call it seven years since RDAR has been a requirement for these large financial institutions.
Assuming RDAR is done well, the net effect is enhanced risk management and decision-making processes at the banks who implement the fourteen principles of BCBS239. Given how intuitive the principles are individually and collectively, I believe it is helping.
However, study after study coming from the European Central Bank (ECB) and the Bank for International Settlements (BIS) shows that few G-SIBs and D-SIBs are done with their RDAR efforts. Stateside, the Fed and OCC increasingly look at data soundness as well. We have seen an increase in consent orders and MRAs citing data deficiencies over the past several years, as explored in this whitepaper.
Through the Supervisory Review and Evaluation Process (SREP), European bank supervisors assess the risks banks face and check that banks are equipped to manage those risks properly. Here is a sampling of findings:
We understand completely. It requires a tremendous amount of work to migrate entire suites of risk reporting away from manual solutions, while simultaneously shoring up your IT and data environments. You’re likely also managing your DFAST and CCAR requirements, both of which benefit from a stronger data ecosystem. Your technology team may also be working on a strategic cloud migration, as many banks have chosen to do. You have a lot going on with intertwining initiatives in the risk reporting space.
RDAR will not drive direct bottom line benefits, but resources and funding need to be dedicated to this effort … if not by January 2016, then as soon as we can get it done now. Let Spinnaker help you.
Our biggest strengths are contributing with expertise and rolling up our sleeves to deliver real results. In conjunction with its RDAR program, Spinnaker helped a Top 30 bank automate its risk reporting in Tableau, while reducing its need to backfill open staff positions. The client team did not have the data expertise or Tableau skillset in house, allowing Spinnaker to help them meet their imposed regulatory deadlines for sunsetting spreadsheets and other manual solutions. Spinnaker brought the client team along on the learning journey, teaching them how to manage the reporting so they could stand on their own after the engagement concluded.
When you engage Spinnaker, you will experience:
Report on the Thematic Review on effective risk data aggregation and risk reporting (PDF). p. 1 and 22. Retrieved March 6, 2023
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