USING BASEL III PRINCIPLES FOR RISK DATA REPORTING TO IMPROVE DATA ANALYTICS
The Basel Committee on Banking Supervision developed the “principles for effective risk data aggregation and risk reporting” as part of its efforts to help Globally Significant Banks (GSBs) improve processes and controls to consolidate and report risk data at the entity level. The need to update the Basel framework and develop the principles originated from GSBs’ inability to demonstrate accurate risk exposure during financial crisis of 2007-2008.
GSBs and other significant financial institutions were mandated to implement the necessary processes, systems and controls to meet compliance with the new Basel III framework (including the 14 principles) by 1 January 2014; however, new provisions are to be phased in between 2014 and 2019. In December 2011, the United States Federal Reserve announced that it would implement substantially all of the Basel III rules by 2016 at the earliest.
The main objective of the Basel III framework is to strengthen the regulation, supervision and risk management of the banking sector in the European Union. However, adoption of the 14 Basel principles for risk effective risk data aggregation and risk reporting can prove beneficial beyond risk reporting within the banking industry, because good quality data has the potential to benefit any organisation using Big Data and data analytics to gain competitive advantage.
The 14 Basel principles for risk effective risk data aggregation and risk reporting can be grouped into four dimensions as follows: governance and architecture; data aggregation; reporting and supervisory review.
The 14 principles are: governance; data architecture and it infrastructure; accuracy and integrity; completeness; timeliness; adaptability; accuracy; comprehensiveness; clarity and usefulness; frequency; distribution; review; remedial actions and supervisory measures and home/host cooperation.
Oct-Dec 2016 Issue