Apr 16, 2015

Navigating BCBS 239: Do You Have All the Right Strategies in Place?


James J. Jockle, Chief Marketing Officer at Numerix, speaks out on the challenging issues surrounding BCBS 239 and increasing risk data, aggregation and reporting requirements.

While there have been many heated discussions in the market about increased capital charges, CVA, liquidity coverage ratios and significant changes in market infrastructure—the number one priority recently cited by Numerix  in its recent ‘Top 10 Basel III Implementation Priorities for 2015 and Beyond’ blog was the need for improved risk data, aggregation and reporting.

BCBS 239, as instituted in the ‘Principles for Effective Risk Data Aggregation and Risk Reporting’ in 2013, cited that many banks, including global systemically important banks (G-SIBs), were unable to aggregate risk exposures and identify concentrations fully, quickly and accurately.

As the world has witnessed, banks' ability to make risk decisions in a timely fashion has been seriously impaired with wide-ranging consequences for the banks themselves, and for the stability of the financial system as a whole.  Moving forward, the Basel Committee and the Financial Stability Board are now expecting banks identified as ‘systemically important’ to comply with the Principals by January 2016.

Will We Be Ready for Compliance?

With less than a year to the deadline, the Basel Committee’s recently published Progress Report on banks’ adoption of the Principles, surprisingly reveals that of the 31 participating banks, 14 reported that they will be unable to fully comply with the Principles by the 2016 deadline.1

Survey Says…

It is also interesting to call out a recent survey in Risk Magazine* where 33% of over 1,000 respondents cited that out-of-date systems continue to be the main driver in spending.  We also see 22% noting investment in technologies for compliance with Basel III. 2

Biggest Challenges

As we refer back to the Basel Committee Progress Report, the biggest challenges were cited to be compliance with the following three principles:

  • Principle 2 (Data Architecture and IT Infrastructure)
  • Principle 6 (Adaptability)
  • Principle 3 (Accuracy and Integrity of the Information)

In fact, nearly half of the banks reported material non-compliance on these principles. This said, fundamentally, we can conclude that compliance with the aforementioned guidelines requires close collaboration across business, risk management, finance, treasury, IT and operations. 

Risk Data: Top 3 Strategy Questions You Should Be Thinking About

While much has been discussed on the requirements of ‘real-time’ aggregation, looking beyond we believe there are three additional priorities firms should be considering as part of their strategy discussions:

As we conclude, our assessment today confirms there are no shortcuts, but only growing pains as banks undergo the continuous push-pull scenario of regulatory compliance—along with the associated costs.

The looming footprint of legacy systems continues to hinder advancements towards efficiency and continues to challenge banks. The trend toward increased investment in new technologies will ultimately lead to a safer financial system for all of us.



1Source: Bank for International Settlements - Progress in adopting the principles for effective risk data aggregation and risk reporting-January 2015

Source:“Hey, big spenders” – Risk Magazine December 2014

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