- New regulatory framework represents frontline of Basel III compliance, challenging banks big and small to rationalise and streamline the organisational processes and technology supporting risk aggregation and reporting
- BCBS 239 challenges banks to implement 87 required protocols spanning 14 principles designed to enhance each organisation’s ability to interpret risks related to trading, investment, wealth management and asset management businesses
- Most regional banks are struggling to translate the complex regulatory obligations to practical actions and are at risk of missing key compliance deadlines
HONG KONG – 24 November 2015
The Basel Committee on Banking Supervision’s (BCBS) regulatory framework for new standards in risk data management, commonly referred to as BCBS 239, originated from the recognition by global and regional regulators that, following the global financial crisis, uncontrollable levels of aggregated systemic risk will continue to develop in the future unless the banking industry collectively unifies around new, more effective ways of managing and interpreting the vast amount of risk information created by trading activities. Regulatory observations related to analysis of this risk data, when viewed as a whole, can be used to diagnose whether an institution, whose failure can threaten the stability of the banking sector, is enough capitalised or not.
A new report from GreySpark Partners, a global capital markets consulting firm, identifies the best practices that both global and region-specific banks should apply to achieve full compliance with the global prudential guidelines. The report, titled Best Practices in BCBS 239 Compliance, explains how banks should tackle the complexity associated with complying with the regulations. Properly addressed, BCBS 239 is an opportunity to improve risk data management accountability at the individual and organisational levels, to develop a holistic view on organisational risk and to ensure adequate resourcing for organisation-wide data management initiatives.
BCBS 239 was designed as a means of ensuring that banks are equipped with the necessary guidance to practically implement the technology as well as the management protocols required alongside increased capital cushions. However, GreySpark observed that many banks, despite being categorised as globally- or domestically-systemically important, are not sufficiently prepared to comply with the Basel requirements. Too few resources have been devoted to the implementation of the required changes and the banks appear to be missing the sense of urgency. GreySpark argues that, beyond just meeting the regulatory obligations, the benefits created by achieving a new level of organisational clarity in risk management far outweigh the costs involved in ensure the compliance with BCBS 239.
Yousuf Hussain, GreySpark analyst consultant and report co-author said: “In reaction to BCBS 239, some banks initiated large-scale IT and business change programmes to address the issues inherent in their risk reporting processes. These types of change programmes present a much greater challenge for some banks in Asia-Pacific particularly because those institutions are still mostly relying on manual or insufficiently automated spreadsheet-based processes. This state of play needs to be compared to the practices of global banking competitors, who have abandoned those outdated methods of managing risk data a long time ago.”
Benedict Cheng, GreySpark managing consultant and report co-author added: “Compliance with BCBS 239 is an important driver for our clients in Asia-Pacific to get a proper grip on data quality, integrity and accountability for its management. This will lead to challenging discussions with the banks and act as reality check exposing years neglect with regards to data-related efficiency issues, data aggregation and reporting capabilities. However, GreySpark observes that banks which are compliant with BCBS 239 are on a path to outperform their competitors whilst also protecting their franchises from excessive organisational risk exposure.”
For further information on GreySpark’s research, please e-mail: press@greyspark.com
