Increasing regulatory pressure requires banks to improve risk aggregation and reporting, but a majority struggle with data inconsistencies according to a joint survey by Lepus Research and business analytics software group SAS.
This technical hurdle was pinpointed by 81% of banks surveyed, while more than half also face difficulties from separate risk systems and inflexible sources.
Lepus surveyed 27 global financial institutions (FIs) about the Basel Committee on Banking Supervision’s (BCBS) principles for effective risk data aggregation and risk reporting. Also known as BCBS 239, the principles aim to increase transparency and reduce operational risks. Adherence to these principles allows banks to improve stress testing and anticipate future problems.
“The survey clearly shows that firms are struggling with the legacy of their separate, siloed risk systems,” said Geoff Kates, chief executive (CEO) of Lepus. “That makes it extremely difficult to combine high-quality data for regulatory reporting, risk and capital management, and stress testing.”
Asked about their ability to prove data origin – a requirement of BCBS 239 – two in three of the FIs surveyed saw room for improvement and 22% identified a need for significant investment.
The institutions were also asked if they expected BCBS 239 compliance initiatives to deliver ancillary business benefit. Many anticipated achieving a more holistic organisational view of risks, with 22% citing improved stress testing capabilities and 30% needing a more holistic view of firm-wide risks.
“In the regulatory-compliance future, stress testing will be an ongoing process of analysing unpredictable scenarios instead of an annual exercise devoid of surprise,” said David M. Wallace, SAS global financial services marketing manager.
“Banks that fully implement BCBS 239 principles as best practices will be able to analyse surprise scenarios on demand for regulators. In addition, they’ll be more effective and efficient in capital planning.”
The full report, entitled
‘Industry Challenges: Implementing Effective Risk Data Solutions’
, may be accessed via
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