ClusterSeven: Basel Risk Data Aggregation
Posted: 3 August 2012
In June 2012 the Basel Committee on Banking Supervision released the paper ‘Principles for Effective Risk Data Aggregation and Risk Reporting’. It seeks to address a key lesson from the financial crisis – “that banks’ information technology and data architectures were inadequate to support the broad management of financial risks”.
These principles, expected to be implemented by 2016, will initially be applied to systemically important banks (SIBs) though national regulators, at their discretion, may apply the principles to more institutions. The first step will comprise company self-assessments in 2013.
A key theme in the paper is what might be called a ‘reality check’ i.e. that executives should understand and be in control of the current state of risk aggregation as well as driving toward a future improved state, whilst maintaining flexibility.
The demand for flexibility in complex risk management departments has always led to a mixture of IT systems, spreadsheets and manual processes. Documenting and controlling this reality is the prime target of the Basel paper; doing this while gaining operational efficiencies will be the target of the banks.